AT40 = 55.9% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 60.6% of stocks are trading above their respective 200DMAs
VIX = 14.8
Short-term Trading Call: bullish
Commentary
Last Friday, the S&P 500 (SPY) rolled over a volatile dollar on its way to another all-time high. The volatility index, the VIX, rose up as the next speedbump, and the S&P 500 stumbled this time. The index fell 1.1% for its biggest 1-day loss in over 5 months. The two-day loss of 1.8% is the S&P 500’s largest since it lost 2.5% over two days on September 9, 2016! So while this decline is but a pinprick compared to the stock market’s relentless gains, I am guessing it feels awful to a lot of investors.
The S&P 500 (SPY) broke its primary uptrend defined by its upper-Bollinger Band (BB) channel
The NASDAQ marginally broke down below its primary uptrend support.
The PowerShares QQQ ETF (QQQ) declined 0.8% and just barely held onto its primary uptrend support.
The short-term trading call stays on bullish as I remain focused on buying the dip. The line in the sand between bullishness and bearishness is still around 2735. If the S&P 500 challenges that line, it may occur just above the uptrending 50-day moving average (DMA). If so, I may need to tweak the line below the 50DMA.
In recent posts, I pointed out the resiliency of the VIX since its last low on January 3, 2018. In rolled over a volatile dollar on its way to another all-time high, I lamented that I may have lost discipline and moved too eagerly to bet on a further rise in volatility. Yet, I noted that the current week was full of events that could roil volatility. The market delivered in a big way. On Monday, the VIX surged 24.9%, and it followed up that performance with a 6.9% gain on Tuesday. With the VIX racing higher, I figured the volatility faders would show up in force at some point: a 25% spike usually marks a last gasp for angst. I tried to lock in my profits on my call options on ProShares Ultra VIX Short-Term Futures (UVXY). Fortunately, the market only filled half my order near the close of trading. I set a higher limit and got a fill right after the market opened on Tuesday.
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