Here were the notes I posted to my chat groups this week:
For three straight days the S&P has opened lower, reversed, and then finished the session with a strong rally into the close. S&P 500 futures are up 45 points. If it hold until the opening then the index will be up over 300 points from Friday's low. That's 300 points… in four sessions. But a rally so much so fast could lead to some short-term exhaustion. That's why I'm looking for a negative reversal today: open high, close low!
Wed, Feb 3
We didn't see a reversal yesterday as I was expecting. Nevertheless it was a great day to offload some gains yesterday. But right now in the futures we see a big hit down by about 50 points for S&P. That should not be really unexpected given we have seen nearly 350 points gain in four straight sessions. So the big question is how much lower the market can go? Well based on the VIX futures I don't think it would be a huge correction: the initial downside would be 4530 for S&P. Below that it will be 4500. The worst we may see down to 4450. But I really don't see that happening. Overall expect some volatility in the next few days π§
We didn't see a reversal yesterday as I was expecting. Nevertheless it was a great day to offload some gains yesterday. But right now in the futures we see a big hit down by about 50 points for S&P. That should not be really unexpected given we have seen nearly 350 points gain in four straight sessions. So the big question is how much lower the market can go? Well based on the VIX futures I don't think it would be a huge correction: the initial downside would be 4530 for S&P. Below that it will be 4500. The worst we may see down to 4450. But I really don't see that happening. Overall expect some volatility in the next few days π§
S&P peaked around 4600 on Tue and then crashed down to 4450ish in the following two days. Miraculously, it did hold up at the final support at 4450 and then shot up by finishing a hair above 4500 for the week today!πͺπ The wild gyrations of this week did provide some trading opportunities. We took some profits off the table when S&P was marching higher on Tue and placed a few short positions to bet on a quick correction. Today, we harvested the gains from the short positions and in turn reopened some long positions to bet on a resumption of the uptrend in the next week. Apart from the charting trends, VIX options have also given me a great deal of confidence to assess the short term trend direction of the market. I still see an uptrend to continue for a while before it runs its course. Again it won't be a straight line up but with volatility and fluctuations. However, I don't see a new high anytime soon. After all, we are not out of the woods yet, far from it π£
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