The S&P 500 has declined -8.49% in dramatic fashion. The nature of this decline at this time appears corrective. We say this because signs of panic are evident in the indicators. Among the indicators that signalled were: the 5-day volume in the S&P 500 at a 6-month high, a third downside gap in the S&P 500, a fourth downside gap in NDX and a 2nd downside gap in the Russell 2000, VIX gained +60% on the day, and >+25% for 2 days running, 5-day volume in NDX was greatest in 8 years, downside volume to upside volume in the S&P 500 was 21/1 and in the NYSE it was 11/1, and both 5-day and 10-day rates of change in the S&P 500 were weakest in 350 days.
A potential bottom has formed. However, we will need further confirmation before positioning long.
In the bullish scenario, it is probable that today’s gains will not hold and a minor new low will develop. In the bearish scenario, a short sharp rally will fail and acceleration to the downside will develop.
The 5-Day volume on the S&P 500 was at a 6-month high. This volume surge in conjunction with 2 days of gain in VIX of +15% or more has generated viable trading opportunities three times in the past.
VIX 3/14 day and 7/28 day deviation indicator signalled. The S&P 500 closed at a 1-month low. This has occurred 5 times in the past. In each instance the S&P 500 was at or near a tradable low.
On August 5, VIX gained +64.90%. VIX has gained >+60% in 1 day 5 times in the past. Market gains of +64%, +10.59%, +11.87%, +10.63%, and +27.88% followed this signal. Drawdowns were minor at -0.40%, -3.18%, -1.78%, -2.56% and -0.97%.
This is from Milton Berg he posts late and charges a lot for his work. Has worked with Soros.
miltonberg.com
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