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[thoughtpwr]

We clearly have a set of stretched circumstances, if the breadth was the best of the year, the thrust being overbought by the largest amount this year, etc.

Paulenoff had something out that analyzed the pre-FED announcement, but his conclusion was muddled a bit, due to the SPX getting back to 2008 in the futures. It didn't get to the 2012 he thought would be required to put in a bottom, but it was also above the 2000 level that he thought marked the channel. Unfortunatlely, in these wild rallies during the last sell off, the endpoint usually finished out of the channel and came back in the next day. On the other side, we could gap and hold tomorrow above 2012 and fulfill his conditional. Not quite conclusive. This is the third attempt at 2017 in the SPX cash over the last week, so failure to break through, probably is a bad sign for the market.

Paulenoff Comment

Along those lines, when you pass below the 50 DMA in a down trend, that is where you get a lot of BIG oscillations in an attempt to recapture the 50 DMA. The last time we had this much volatility passing through the 50 DMA in Oct, the big rally was followed by a day that was down and wiped out all of the gains (again a Thurs) and we followed with the days Fri, Mon, Tues, Wed that did most of the damage in the shortest amount of time over 5 days. Incidentally, the Bradley date just happens to be six days out at 12/26, which would fit into a similar down move and endpoint to that of the Oct low. The fact that it is a Bradley date makes this consideration more plausible. The first Bradley date in 2015 is Jan 31, in an uptrend.

The new lows contracted a good amount today, as seen below, by an amount (~ 30%) that could be counted as a first step to a bottom. One needs to see a further shrinkage down to about 10% of the peak or about 70 tomorrow before you have a bottom in place, based upon our last occurance. We are currently above levels at which the new lows began to expand again during the Oct sell off. So tomorrow should tell the story on a low being in place or not.

New Total Lows

Also the outcome from a VIX & OVX perspective, OVX didn't finish low enough to be a Buy signal, but VIX did (from the highest intraday high -3). We failed to follow through on the last VIX Buy signal on the day before, so this is muddled. If oil is driving things, then I would expect the SPX VIX signal to be over shadowed until the OVX generates a buy signal. It could easily generate one tomorrow.

I have to admit that the oil stocks I am watching, XOM for instance, would only need one major down move to get into buy territory for me from a formation standpoint to be a buyer (after it had a day that broached yesterday's high after reaching a sufficiently low close from yesterday). I am not sure I don't buy XOM and DVN tomorrow at the close, even if we wipe out today's gains, if they hold above the previous day's close.

With the probability that tomorrow is a down day and people will likely NOT buy into Fri close (meaning it will sell off into the close) with as much turmoil and volatility present, I would think we have a decent shot at going down to at least 1950 before this one is over. If we sell off that far without increased shorting present, we probably reach the Oct lows to put in a second bottom in that area, which is actually more bullish than if we stopped right here.

There is no formation based SPX Sell signal for Thurs, but tomorrow should tell us a lot about whether a bottom is in place or not.