The S&P 500 finished the day lower yesterday, falling by 15 bps. The index fell sharply to start, and bottomed around the European close, and gained back most of the day’s declines. The index for the second day in a row climbed to a high of 4485 but failed to push through. That is the third attempt to get above 4485 this week.
Today is quadruple witching, and that should loosen this market up quite a bit and allow the volatility to pick up gamma levels get reset. The big reset comes right on the open when index options expire. This should immediately unleash the index from the tight trading range this week.
For now, it seems impossible to find any clues to what happens next. There has been no improvement in the Advance/Decline line, which has just continued sideways, and other sectors like housing and transport have continued to churn.
The only noticeable thing is that the percentage of stocks above their 200 day-moving-average in the S&P 500 is now at 70%, and that is the lowest level it has been in some time. In more recent times, when that number has fallen below 70%, it has been typically associated with the index dropping, so that may be a very important indication of what comes next if that number continues to trend lower as it has. There also remains a considerable divergence between it and the index.
Additionally the NASDAQ McClellan Summation Index is now trending lower again, and typically when the index gets this low is associated with lower levels on the NASDAQ Comp.
The same appears to be true for the S&P Index as well, although it is not nearly as low, but a rather notable divergence.
Yields
I’m stilling waiting to get some form of confirmation on treasury yields, including on the 10-year note, and which way they want to go. The other day it seemed as if we were going to break lower, but that has been avoided for now.
Dollar
The dollar was very strong yesterday, rising back to 92.90 and the trend higher still looks very strong, with a retest of 93.50 likely coming soon.
Gold Miners
The strong dollar heavily on the Gold Miners ETF (NYSE:GDX) yesteday, which fell by 4%. The ETF finds itself at critical support around $31. A break of support at $31 would spell big trouble for the group and a big drop.
Caterpillar
Caterpillar (NYSE:CAT) is struggling and is sitting on support at $203. The trends in the RSI are not strong, and suggest the decline is not finished yet. The way commodities like Iron Ore and Copper are dropping one would think that Caterpillar will be following them lower really soon.
Alibaba
Just when you thought it couldn’t get any worse for Alibaba (NYSE:BABA) it actually can. The stock has been destroyed and I fear this is not the bottom for it. The stock is retesting support at $154 and the way the RSI and the price are coming together, there may be another leg lower to $146.
