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Trading Lessons

Stock Market SPX 100 Point Drop?

Stock-Markets / Stock Markets 2018 Mar 05, 2018 - 03:44 PM GMT

By: Anthony_Cherniawski

Stock-Markets

SPX futures have started to decline again as of 6:00 am. SPX is on a sell signal, having declined beneath all Cycle supports, including the 50-day Moving Average.

Today the Fractal Model suggests a decline of approximately 100 points that should take SPX beneath the Cycle Bottom support at 2603.68. Unless something breaks down, it does not appear that it will take out the prior low at 2532.69. That may complete Wave 1 of (3). From there we may see a bounce back to the trendline near 2675.00. Prepare yourself for some wide swings as the volatility increases.

ZeroHedge writes, “What started off as a sea of red, with S&P futures tumbling as much as -25 points ahead of the European open, on fears of trade wars and concerns about the surge in Italy's anti-establishment parties, has managed to rebound notable and stabilize, with most Asian and European markets now green. The dollar was steady and Treasuries gained, while Italian bonds dropped as the nation headed toward a hung parliament.”


NDX futures are trading flat this morning. It is due to decline to 6400.00 in the next day or two, according to the Fractal Model. Remember that Wave 1 of (1) was the smallest Wave (only 128 points). Wave 1 of (3) is set to be nearly 600 points (4.62 times the length of Wave 1 of (1).

VIX futures have climbed to the Cycle Top resistance at 20.74 which confirms the buy signal. It may hover in that area for awhile. It seems that VIX may be lagging the SPX at the present time. VIX may rise exponentially only after the short volatility positions are wiped out.

Charles Hugh Smith comments, “One of the greatest con jobs of the past 9 years is the status quo's equivalence of risk and volatility: risk = volatility: so if volatility is low, then risk is low. Wrong: volatility once reflected specific short-term aspects of risk, but measures of volatility such as the VIX have been hijacked to generate the illusion that risk is low.

But even an unmanipulated VIX doesn't reflect the true measure of systemic risk, a topic Gordon Long and I discuss in our latest program, The Game of Risk Transfer.

The financial industry has reaped enormous "guaranteed" gains by betting against volatility. As volatility steadily declined over the past two years, billions of dollars were reaped by constantly betting that volatility would continue declining.”

TNX futures are declining this morning. It is likely that TNX may continue to decline over the next three weeks.

The NYSE Hi-Lo Index is on a sell signal, so we have reassurance that the decline may continue.

USD futures are rising this morning. Remember that a sell-off in stocks may increase the demand for dollars, despite its weak appearance. The Orthodox Broadening Top, which is visible on the weekly chart, suggests a rally to 96.00 over the next two to four weeks. It may push to the Cycle Top which is currently at 97.16, but declining.

USD/JPY continues its decline, despite the USD rally. That is primarily due to the Yen acting as a safe haven for investors fleeing the declining equities markets. It, too may rally, but not until it reaches “point 6” which appears to be near 103.00.

Commodities are flat this morning, but may also resume their declines soon.

Regards,

Tony

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If you are a client or wish to become one, please make an appointment to discuss our investment strategies by calling Connie or Tony at (517) 699-1554, ext 10 or 11. Or e-mail us at tpi@thepracticalinve4stor.com .

Anthony M. Cherniawski, President and CIO http://www.thepracticalinvestor.com

As a State Registered Investment Advisor, The Practical Investor (TPI) manages private client investment portfolios using a proprietary investment strategy created by Chief Investment Officer Tony Cherniawski. Throughout 2000-01, when many investors felt the pain of double digit market losses, TPI successfully navigated the choppy investment waters, creating a profit for our private investment clients. With a focus on preserving assets and capitalizing on opportunities, TPI clients benefited greatly from the TPI strategies, allowing them to stay on track with their life goals.

Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

Anthony M. Cherniawski Archive

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