Down and up

The markets opened sharply lower, then recovered most of the losses by day's end. The initial sell off was fast and furious, the rebound was a slow grind. The last few days have been moves lower - with lower highs and lower lows. Today's move looked to continue that pattern.



On a larger scale, a few interesting moments showed up today. There was no real action on the SKEW, the volatility indexes, or the Put/Call ratios. The latter are still on sell signals.

First, the set up on the RUT is already short term negative. The shorter term lines on the Market Forecast have peaked and look to fall further. All the while, the Intermediate (green) line is sloping downward.

 

Second, the NDX registered a bearish cluster on a lower close after 7 days of new highs! This is a great setup for a potential flattening of this uptrend.



Third, an index I don't usually mention - the Semiconductor Index (SOX) - may have put in a lower high today, while its RSI is falling from very high levels. The SOX also put in a dark cloud cover candlestick pattern a few days back. This index is a leading indicator and is highly correlated with the NDX usually.



With GLD continuing to rise, there are dangerous signs that this bullish run is coming to a soft spot (at least). In fact, the StockTrader's Almanac notes that the week of options expiration in January and the days surrounding the Martin Luther King holiday are weak.

I took a small position on the SPX calls by selling the 2085/2095 spread expiring next Friday for $1.05. I sold this too early today, but the SPX would have to make and hold a new high for this trade to be in trouble. Next week should be interesting.