Wednesday, January 20, 2016
A crazy day as the Dow fell over 500 points, then recovered most of that only to drop back in the final half hour. We finished the session with a loss of 249 points on extremely heavy volume. The advance/declines were shy of 3 to 1 negative. The summation index continues lower. Early on the carnage was significant as global markets were clobbered overnight. There seems to be a global liquidity squeeze that just won't let up. Todays intra-day comeback was impressive though. Whether it was short covering or investors stepping in, it looked like something that you would see at the end of a decline. The small stocks led the way back and that is positive. I now do think that the decline has ended and will be looking to purchase some SPY February calls on weakness tomorrow. I could be wrong but I don't think so. GE was off 1/2 on very heavy volume. I canceled my open order for the February calls here. I will reconsider this trade overnight. It has to be done ahead of the earnings on Friday if I'm going to attempt it. Gold found a bid on the sell off in the stock market. The futures were higher by around $15. The US dollar finished the day little changed. The XAU rose 1 1/4, while GDX was up 1/3. Volume was good. I doubt that this is the beginning of an extended up trend. One the stock market settles down gold will probably drift. Mentally I'm feeling OK. Quite a day in the markets as it looked like at one point the possible crash scenario may have been a day late. However with such a dramatic comeback beginning at mid-day, that did not happen. To me, that was a game changer. I'll be looking to buy some SPY February calls tomorrow. The McClellan oscillator is also very oversold and due to turn around. The only thing that would change my view would be another collapse tomorrow with no comeback. I do not think that will happen. Whether or not I try a GE call trade as well will be determined by me tonight. Again, the risk here is higher because it's an earnings play. But GE is very oversold as well and could help turn around the overall market if the report is viewed favorably. But that's a lot of ifs. We'll see if the foreign markets can hold up tonight as the worldwide sell off continues. Once again we are in a zone that I have no idea of the reasons for the market action. We've been oversold and haven't been able to break out of that condition. But I do think that the end of the decline is near if it wasn't today. It will be another challenging day tomorrow. Hopefully I'll be up to the task.