Monday, August 24, 2015
Not your typical Monday in the summer. The Dow continues in crash mode, losing another 588 points on extremely heavy volume. The advance/declines were 19 to 1 negative. The Dow opened down a bit over 1000 points this morning. The summation index has run through the zero line and is heading lower in a hurry. Stock markets around the world are falling apart. Volatility is off the charts. I had support at around 1900 for the S&P 500 but 1850 now looks like a better level. You can try and catch the falling knife but the sidelines aren't a bad thing. That said, we will bounce this week but the question is from what level. Option premiums are very high. I'll have to see where the McClellan oscillator finished today. If and when we get below the -400 level is where we should see a bounce. Not exactly sure what is going on here but I'd venture to guess that we are getting a worldwide margin call where anything will be sold to meet the requirements. GE lost 3/4 on very heavy volume. It was much lower but it is hard to say where you actually could have purchased it today. The electronic quotes vs. reality comes into play. We are also in a fast market which puts a skew on things as well. Gold did not see a flight to safety as it too had to be sold. The futures here fell $5 despite a drop of over a point in the US dollar. The gold shares got pounded with the overall stock market. The XAU shed 4 points, while GDX dropped 1 1/4. Volume was huge. My ABX October calls are back solidly in the red. Let me say that nobody knows how long this rout can continue. This is one of those rare technical events. The bull market long term trend line comes in at 1750. Perhaps we'll make it all the way back to there. Very oversold now but we are in crash mode. I may try the SPY September calls on weakness tomorrow depending on the McClellan oscillator. But any trade now carries more risk than usual due to the nature of the environment. But you can't trade scared. However I can also make the case for sitting on the sidelines until we get back to a more normal market atmosphere. It has been one crazy summer. Gold is not seeing the flight to safety that I would expect with the events surrounding us. Neither is the US dollar. I believe that is telling us that this is some type of liquidity driven event where anything of value has to be sold. That's a guess as usual. We'll see if the decline continues to feed upon itself around the globe tonight.