S&P 500 Index (SP500)

[DiscoverGold]

Trading Notes: Tuesday, January 19th
By Brett Steenbarger, Ph.D.

* January 19, 2016

* Everyone wants to trade with confidence and conviction, but that means that we have to keep mind and body in peak conditioning, especially during busy markets.

* We traded to new lows for this move on Friday, but interestingly we saw the first evidence of divergences in the new lows data for SPX stocks. For example, we had 129 more new 100-day lows than new highs on Friday, surprisingly short of the 167 differential on Wednesday. Only 8.96% of SPX stocks traded above their 10-day moving averages on Friday, but that was still higher than Wednesday's level of 4.98%. (Data from Index Indicators). Among SPX sectors failing to make new lows on Friday were XLU, XLE, and XLV. The relative strength of the XLE shares is notable, given the recent weakness in oil. We've bounced well off Friday's lows in holiday and pre-market trade.

* Last week's trading notes observed evidence that the current market downturn has been more persistent than recent corrections. When we've had significant declines in August, 2011 and May, 2010, we saw follow-through weakness even after a momentum low was reached. I am open to that possibility in the present market. If, however, we have indeed put in a momentum low, we should see more of a two-way trade going forward than what we've seen thus far in 2016.

* My intermediate term strength measure, which takes into account 5, 20, and 100-day new highs vs. lows among SPX shares, opens the week in unusually oversold territory. With VIX closing above 25 on Friday, we should continue to see meaningful volatility.



http://traderfeed.blogspot.com/2016/01/trading-notes-week-of-january-18-2016.html

• George.

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