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U.S. Equity Markets Plunge More Than 6% With Emotions Running High S&P 500 Data Matters More Than Ever

What the S&P 500 data says now will make the difference going forward. Will the equity markets plunge lower or bounce? Will emotions over-rule the data? The latter suggests there several reference points that most investors will look at today.

Futures are bouncing hard, from pre-market lows.

CNBC, FOX Business and Bloomberg alerted “The Street” about Wednesday’s emotional climax. Small investors most likely opened their 401(k) and IRAs last night in panic mode, while others placed sell orders at the wrong time. Emotions are clouding their decision making.

Guy Adami said it very well yesterday, paraphrasing, “don’t act on emotions, give the markets a week, then reassess the situation.”

These were some of the smartest words and advice that I’ve heard uttered on CNBC lately; no speculation, just common sense. Wait for the data to confirm your decisions.

Drawdown October 10, 2018

  • S&P 500 Futures are near the 200d in pre-market trading, and currently trending higher. Session lows were /ES 2748.00 (+/-) or (-6.75% below ATH).
  • VIX was trading 24.30 at session highs this morning and fading into the Opening Bell. At these levels, VIX is very extended from its 50d and will typically revert back to mean in the short-term.
  • StochRSI in the lower panel has triggered buy signals from this zone in the recent past.


SPX VIX October 10 2018


S&P 500 and SPY Weekly – Emotions Versus Data

More data points are piling up creating a confluence of indicators on the S&P500 and SPY.

Price action is near the March/June breakout zone. The 50ma weekly is just below and evidence of short covering is beginning to filter into the morning session as we go to press.


SPY Weekly


Planning for the eventual drawdown over the past three weeks included taking profits into all-time highs. This strategy of selling into strength as divergences accumulated helped us keep emotions in check. We collected cash for the eventual re-entry in the short-term.

While we will not react immediately, Fibonacci levels are nearby. VIX, NYMO and Put/Call are all near extremes, so the cavalry is likely lurking just out of sight. We are particularly interested in sector performance, as we await institutional footprints. We want to position in the right sectors, so read this as waiting for evidence of their conviction. We will do as they do over the next few trading days.

Congratulations to those of you in the trading room who took precautions (SPX and SPY puts).

Join us during our LIVESTREAM broadcast during market hours. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.

Happy Trading,



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