On Thursday, the SPX closed at 3829.34 or -2.45% on heavily negative market internals and a strongly negative sector profile. A-D lines were depressed to -2000 for much of the session and NYSE breadth declined from the open to finish at -6.2:1, while NASD breadth finished at -6.39:1. That is not as severe as it can be, but that was harsh.
That was not too fun at all. Observe all four indices and see where they are relative to their 50 day moving averages and trend lines. The SPX has not touched its 50 day, the NDX is below its 50 and its primary trendline, the RUT is on its 30 day and below a trend line and the DJIA is still above its 20 day.
It is difficult to snapshot the ES profile because it is quite long. The VIX had a big day and closed at 28.89 or +35.38%. This means that preparation for lower prices was maintained at the close. Are they right and how long will they be right? If participants are going to stay in protection or net short after such an IV spike and SPX so close to the 3800 level, they obviously have a strong point of view about market direction. Be aware that the unfilled ES gap up from 1- 2 February and the naked ES point of control at 3771.50 will be in play if we break 3800. That would correspond with an even higher VIX, and some may be cautious to go out short there on a Friday. If 3800 gives way in a sustained way, though, there could be even more hedging of hedging, so bulls are hoping that does not happen.
The Treasury market was in sync with equity market today, but it was a more staggered sync in the second part of the session. Bonds and notes would drop and repair ever so slightly. The correlation started to lag vis-a-vis SPX, but the net result is clear. Two things to watch overnight are the NQ futures and the VX futures and tomorrow the VIX. Many are going to stand back and watch here for good reason. I was trading the NQs at the close and that was too crazy. If you are trading anything related to this stuff, please be careful today.
