#MarketTiming – Plunge to a climax low?

The general market seriously tanked today – Dow down 724 points, SPX down 68, the Nasdaq Composite down 178.

And it was an across-the-board slaughter as every one of the nine sector ETFs I follow slammed into sell signals, with eight of the nine now oversold on the close.

The all-important long-term breadth indicator – the McClellan Summation index — is on its fourth day down, making it obvious which side of the market to be on, but even more telling is that this is a wind down that began nearly two weeks ago on the first day down from the bounce top on March 12th (see the chart below).

There is a lot of stuff going on that could have led to this drop — Trump, Trump’s tariff plans, Trump’s saber rattling, Trump’s staff members bailing as fast as they can, the Trump chaos (we have a sitting President in litigation with a porn star and so far she and he lawyer are kicking his and his lawyer’s butt), uncertainties springing up everywhere; and the Fed is raising interest rates.

All that is taking a toll of course but this a market that has been moving up too far and too fast so the last two weeks were at some time inevitable.

Is this a bear market? Still hard to tell. The VIX, which measures volatility, is above 20, which is the territory for a correction in a bull market, but it is for the second time this year flirting with the 25-level (it closed at 23.34 today), and that is the door to a bear market. If the SPY (SPX) takes out February low either right now or after a bounce without a significant rally, a bear’s growl may, for sure, be heard.

The trouble with bear markets is by the time everyone feels enough pain to panic they are over. I suspect if this becomes a bear market that pain is going to last a lot longer than anyone believes.

But back to today. So was this drop enough downside to make a climax low. Probably not but it could lead to another quick bounce. Given that there are now pretty defined resistance trend lines in place (see the chart), this next bounce might be worth trading but it is not likely to do anything more than produce another selling for shorting opportunity.

Regardless, this is a market that after two weeks down is oversold everywhere. Four times in the last seven days, my nifty-50 stock list has had 40 or more stocks on sells, which usually indicates the bottom of a swing or the beginning of a bottom. CNN Finance’s “Fear and Greed” index is at an “extreme fear” level (at 9…it can’t go below zero), which longer-term is usually buy territory. As noted above all of the sector ETFs, as well as the index ETFs I follow like TQQQ, UPRO and TNA, are also oversold.

All in all, time for another bounce…

Except this time, maybe a crash into a climax bottom tomorrow and Monday instead (an echo of 1987)…

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 4).

PRICE: Sell. (Day 2).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 1).

CONTEXT:

SPY CLOSE – 263.67
QQQ CLOSE – 162.8
CNN MONEY’S FEAR AND GREED INDEX: 9, falling, extreme fear level).
NIFTY-50 STOCK LIST: 8 Buys; 3 Overbought, 24 Oversold, 1 new buys today, 13 new sells.

(click on the chart for a larger view)

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