The Market made its decision …. And here we go.. 8/23/15

The market made its decision as to how to resolve its sideways action and down we go. This is why I like technicals as I did see this coming and am sitting on the sidelines. See my last post. The SPY ETF is now showing a down signal. The trading system I have on it is definitely weighted to the upside, so when I get an exit long signal, I get cautious and leave my long positions. When I get a down signal on SPY as we see now, that is certainly more serious. Friday’s drop was massive. Most investors are going to be surprised when they get their portfolio positions as the market is definitely down about 7% for the year and will impact 401K accounts. Gold (GLD) and Treasury bonds (TLT) have perked up.

When I look at the chart on SPY, I see high volume spikes already occurring. That may actually suggest that we could be approaching a reversal point. See the last time we had a volume spike on SPY after the drop back in 10/15/14, the market reversed back up. This time I expect we will see more pain but fast drops do lead to quick upside reversals as well.  I will go ahead and start watching for a place to buy some long call positions on QQQ and/or SPY to make some money on the reversal. I will be wanting to buy when the high for the previous price bar is exceeded so as to avoid buying too early. 

Oil has got slaughtered more since my last post. Technology sector for the S&P is down over 6% and has a greater weighting on the S&P than oil. I looked at blue ribbon stocks like Exxon last month and saw comments from folks who said that as Exxon (XOM) dropped that was a great buying opportunity. Not for me. As far as I am concerned when the stock has a down signal, I don’t care if it’s a blue ribbon stock, I am out of it. Down means down and there is no way of determining how far these down drops will go. XOM is down more than 28% to $72 from its high of over $103. Needless to say that is huge. I will consider up when I get an up signal.

Part of me still says this drop is just not enough….that we should be prepared for more. Still I think we will expect a bounce before that happens.. and I will need to use suitable technical to call that out and not trade based on just emotion.