CHARTIST HOTLINE
Friday, August 21, 2015
The purging continues with the Dow losing 531 points -3.13% which was the sharpest loss since August 10th 2011 when it lost 519 points -4.16%. All 30 Dow components finished in the red led by Apple -5.8%. Our Actual Cash Account $28,846 -2.7% while the Aggressive Account $184,736 -2.8%.
Our Overbought/Oversold indicator finished today at -4.69 which is the heaviest oversold reading since last October. A snapback rally is certainly overdue, that is a given. But really counts what happens after the rally.
The current selloff is in many ways similar to last October. The VIX or fear index finished today’s session at its highest level of the day at 28.32 which is slightly below last October’s peak reading of 31.06. The S&P 500 is now 7.5% below its highest closing level of the year versus minus 7.4% last October. It is also holding narrowly above its December lows which marks the bottom of a trading range that it has been locked in for several months.
Trader’s note that iShares Russell 1000 Value(IWD) and iShares 2000 Growth(IWO) closed below their mental stops today and should now be sold. Illumina (ILMN) closed below its mental stop yesterday and was sold today at 198.75 +3.20%. Palo Alto Networks (PANW) also closed below its mental stop yesterday and was sold today at 153.95 +12.71%. It goes without saying that Traders should monitor all mental stop closely, especially in this environment.
There is no question that a great deal of technical damage has been done, but it does not necessarily translate into the beginning of an extended bear market. Our long term models although weakening are still positive; however another day like today could possibly trigger a long term sell signal.
Stay 100% invested.
Our next regular hotline is scheduled for Tuesday, August 25th, 3:00 p.m., West Coast Time.
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