From a standpoint of market panic, we are likely nearing a point of capitulation. In 14 sessions we have declined 450 S&P points and non-financial news outlets are heavily reporting on the losses -- frequently saying that the declines will continue and that there is 'no good news in sight.' Anecdotally, I've been hearing passive, average investors contemplate buying puts or selling their gains while they are still ahead. These are the classic makings of capitulation.
The most likely scenario to play out would be a huge wave of selling on or near the opening tomorrow (Dec. 26th), accompanied by a much greater wave of buying. The VIX might spike up to 40 or higher and that would be the last gasp before cooler heads prevailed. Will this mark the beginning of a new bull market? Almost surely not, but we will at least find an interim bottom. I would caveat that I am not bullish in the long term. The market has a lot of proving to do before we can discuss it recapturing its highs. That being said, we have likely come too far too fast and stocks are looking pretty cheap here especially considering most of the selling has been done in between earnings seasons.
When the market goes into extreme sell off mode, things get sloppy and volatile. Using an X-acto knife with a trendline in a market like this is nearly impossible, but above is my best attempt at it. The S&P 500 is nearing multi-year trendline support going back to 2008. The line on the bottom, hourly chart is the same line from the weekly chart but zoomed in.
I think we can take a shot at buying the S&P 500 between 2290 and 2270, using 2250 as a stop. Targets would be 2480 and 2620. An accompanying VIX spike will be the even more confirmation that this trade is right.
The most likely scenario to play out would be a huge wave of selling on or near the opening tomorrow (Dec. 26th), accompanied by a much greater wave of buying. The VIX might spike up to 40 or higher and that would be the last gasp before cooler heads prevailed. Will this mark the beginning of a new bull market? Almost surely not, but we will at least find an interim bottom. I would caveat that I am not bullish in the long term. The market has a lot of proving to do before we can discuss it recapturing its highs. That being said, we have likely come too far too fast and stocks are looking pretty cheap here especially considering most of the selling has been done in between earnings seasons.
When the market goes into extreme sell off mode, things get sloppy and volatile. Using an X-acto knife with a trendline in a market like this is nearly impossible, but above is my best attempt at it. The S&P 500 is nearing multi-year trendline support going back to 2008. The line on the bottom, hourly chart is the same line from the weekly chart but zoomed in.
I think we can take a shot at buying the S&P 500 between 2290 and 2270, using 2250 as a stop. Targets would be 2480 and 2620. An accompanying VIX spike will be the even more confirmation that this trade is right.