Friday, December 18, 2015
It's beginning to look a lot like, well not Christmas but a market collapse. The Dow fell 367 points on expiration extreme heavy volume. The advance/declines were only 2 to 1 negative again which really has me puzzled. The summation index continues lower as we approach the zero line. Either the recent market action is option expiration related or we are in for a crash. Make no doubt about that. I really did not believe that the market would fall apart here but it appears to be doing just that. The TRAN is now making a new low and that's bearish. The weekly candlestick charts for the major stock indices look bearish. The short and medium term technical indicators have turned down. My SPY January calls are losers. I almost bought some more today at a closer strike price. But somehow reason appeared in my mind and said that would be like throwing good money after bad. For once my brain worked and I didn't buy them. GE was off 1/4 on heavy volume. If GE continues downwards from here that would be another bad sign if you're long. Gold bounced back $15 as the US dollar was lower. The XAU was up 1 1/3, while GDX gained 1/3. Volume was average. Perhaps a flight to safety for the gold shares and gold today but I wouldn't expect any sustained rally here. Mentally I'm feeling OK. At this point I'm a little afraid of what might happen on Monday. We had a gap down to start the day today and nothing but selling after that. Plus we closed on the low of the day. Things just really look bearish after the past two trading sessions. In retrospect I should have just stayed on the sidelines for the remainder of the year but it's too late for that. The S&P 500 has never had a down year that has ended in a 5. We may be on the verge of breaking that. Is it possible that things will turn around on Monday? Maybe but it certainly doesn't look probable at this point. Once again there are things going on underneath the surface that only the market knows about. Or so it seems. The breadth in the past two days certainly does not suggest a market down over 600 points. We now roll into the January option cycle which has 2 less days in it due to the holidays. We will need to see quite a Santa Claus rally to get things turned around here. Normally I would expect next week to be slow with Christmas occurring on Friday but in this environment, who knows? I'll be going over all the charts over the weekend but it is really a time to be cautious regardless. If we somehow have a strong bounce back on Monday, then my bearish posture here could be wrong. If we continue to head lower, it could be a pretty ugly day. For now it's Friday afternoon and time for a break.