After the close and before checking the
election results I quickly jotted a couple of notes on the SPX and
COMPQ. The general market has been in a down
trend since 09/14 with the NASDAQ taking the brunt of it. I've noted
a number of times that the SPX has shown relative strength in
comparison and that should heavy selling begin to hit the tape this
may offer the best risk/reward scenario. The recent bounce and small
range offered a lower risk entry by establishing a lower low pivot to
trigger entry.
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| $COMPQ |
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| $SPX |
There's three reasons why I looked
specifically at shorting the SPX rather than the NASDAQ.
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| $COMPQ |
1) Generally, markets will correct in
tandem and since the NASDAQ has lead this down trend my hypothesis is
that the SPX will catch up so there is greater reward/risk
2) The $BPSPX is at 69
while the $BPCOMPQ is at 53 confirming the SPX has held up much better
during this correction.
3) The $RHSPX is at 94 in comparison to
the $RHCOMPQ which is at 16, so I consider the NASDAQ slightly
extended here and more likely to have a counter-trend bounce.
 |
| $SPX |
At the close of today there were 5 ETFs
which put in year high volume giving a clue to current market
psychology, the SPXU, SDS, UVXY, VIXY, and VXX. When volatility
spikes the corresponding ETFs can break sharply, and during
capitulation phases can offer low risk/reward opportunities of 30% to
50% or more.
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| SPXU |
 |
| SDS |
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| UVXY |
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| VIXY |
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| VXX |
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