February 11, 2016
2:00 p.m. EST
There are several factors lining up that indicate that the market might be nearing at least a short-term bottom:
1. The market (SPY @ 181.99) is approaching a point where it found support three times before in the 180-181 area.
2. After breaking the downtrend line at 1 in late January, the market formed an intermediate peak at 194.58, then sold back down to the low point of the recent sell-off. This is what Vic Sperandeo calls a "2b buy point", so-named for being the second of three signs of a trend reversal and an extremely low risk entry point (one could go long, putting a sell stop just below the 180.38 support).
3. Volume on down days is lower than in the past, indicating that bears are less committed. The most recent up day had better volume than yesterday's sell-off day (it's too early to determine how it will compare to today's volume).
4. The 13.55% sell-off from recent peaks is beyond the normal point at which the S&P 500 tends to turn around. Caveat: this is the weakest piece of evidence and should never be used alone!! There is no such thing as a market that is too low to sell or too high to buy!
Bottom line: if you have money to commit to the stock market (a 70:30 stock:bond portfolio could be strategically re-balanced here), you will probably be grateful if you did so now. If you are a trader, this is a good, low risk entry point with a stop less than 1% away.
Caveat emptor: if the market decisively violates support at 180, the sell-off could be quite ugly, but trading is a matter of probabilities and right now the probability favors going long equities at least for the short to intermediate term.
2:00 p.m. EST
There are several factors lining up that indicate that the market might be nearing at least a short-term bottom:
1. The market (SPY @ 181.99) is approaching a point where it found support three times before in the 180-181 area.
2. After breaking the downtrend line at 1 in late January, the market formed an intermediate peak at 194.58, then sold back down to the low point of the recent sell-off. This is what Vic Sperandeo calls a "2b buy point", so-named for being the second of three signs of a trend reversal and an extremely low risk entry point (one could go long, putting a sell stop just below the 180.38 support).
3. Volume on down days is lower than in the past, indicating that bears are less committed. The most recent up day had better volume than yesterday's sell-off day (it's too early to determine how it will compare to today's volume).
4. The 13.55% sell-off from recent peaks is beyond the normal point at which the S&P 500 tends to turn around. Caveat: this is the weakest piece of evidence and should never be used alone!! There is no such thing as a market that is too low to sell or too high to buy!
Bottom line: if you have money to commit to the stock market (a 70:30 stock:bond portfolio could be strategically re-balanced here), you will probably be grateful if you did so now. If you are a trader, this is a good, low risk entry point with a stop less than 1% away.
Caveat emptor: if the market decisively violates support at 180, the sell-off could be quite ugly, but trading is a matter of probabilities and right now the probability favors going long equities at least for the short to intermediate term.
