Lines in the Sand

posted Oct 20, 2014, 10:51 AM by Katie Shook

If you’re looking for a lengthy, witty discussion on how we should view the Fed, geopolitics, Ebola and the global economic outlook– too bad.  Just turn on any financial channel and you can get opinion-spew until you’re blue in the face.  All it is is opinion and ‘what if.’  It’s guessing.  It’s selling advertising time.  But it’s not the core issue.

Here are the lines in the sand I suggest you pay attention to this week:  the 200-day moving average and the 10% correction level.  For the SPX, that’s about 1906 and 1819.  It’s nearly a 100-point range.  It’s also completely realistic to have the market move that dramatically this week.

The database is at about 32% long — so we’ve still got very bearish conditions out there.  Thursday and Friday last week were decent recovery days.  But be on the look-out for the ‘dead cat bounce.’  Futures over the weekend were up about a half a percent (implying an SPX value of approximately 1888 or so at the high).  Unfortunately, those gains eroded away over the wee hours of Sunday night into Monday morning.  This market is still in a battle to hold the 1819 line in the sand here.

My opinion (dangerous as it may be) — we’re still likely to see an intra-day print below 1800 soon.  I’m thinking mid-1770′s based on the charts.  But, of course, that’s the kind of thing I’d like to be wrong about.  That’s why I trust our systems more than my opinion…

Weekly Estimated Range 10-20-14

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