Oct
13
After a few weeks of downtime all I can say is Wow. This market has been the most unbelievable I have ever seen and I lived through the dot-com implosion. Imagine if we still had "curbs in effect", it might have taken months for all this to play out. Strings of records for both volatility (VIX) and point moves. As I write this the DOW was up 936 from Fridays close. This is one of the first times recently a huge gap up at the open held and pushed higher. Lately when the market gaps in one direction at the open it goes the opposite way. Not today.
Lets look at the big picture, the SPY on our monthly chart.
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Back on the July post http://blog.investingsystems.com/date/2008/07/ we noted the dreaded "M" pattern that was forming on the monthly chart. Never thought it would play out so fast but maybe that’s a good thing.
We want to see a bottom form, which will take some time perhaps, that looks like a "W". For now the snap-back day was fun but most buy-n-hold investors are still way underwater on positions. Heck who would have thought AAPL could lose half its value in a couple months.
We are on HIGH-ALERT for a technical snap-back. The S&P 500 has spent the last 10 sessions closing below the 5-day moving average which is a statistical extreme. The Stochastics on the Daily, Weekly and Monthly are all at extremely low levels below 20. The VIX has reached all-time levels never before rising over 100 on Friday which hasn’t occurred since the great crash of October 1987 . We have a 10-day low alert, 5-consecutive lower lows, declining issues greater than advancing issues 5 consecutive days, the list goes on. It is stretched to the limit. This market is ready for a Rally! However be cautious as we are no doubt in for lots more volatility.
In and out trading is the way to go and using some scaling strategies should work great going forward. When they throw away good stocks like last week there are obviously some bargains, but as we have seen, in a selling frenzy all the traditional metrics go right out the window. A common theme that seems to be coming back is dividend investing. More on that later.
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