Yesterday was definitely a trend down day. The Monday market gapped down huge and continued its slide. It's the only big down day we've had since March 20.
Incredibly, we've managed to close below the 835 support which I've noted week after week in the recent rally. This is definitely a strong indication of the end of this 6-week long rally (conveniently reminded all too often to us by the media).
Around 10:00 am yesterday, notice that the TICK on Figure 2 has been trending down and then made a pop up. Yet, the price failed to budge. The Advance-Decline line always kept sliding in the early morning. These are early indications of the things to come yesterday. Further upside pop on the TICK (above 500) throughout the day were basically ignored on the price. That added to my resolve and my stop for SRS just below yesterday's close was very safe.
From Figure 3, we see the VIX has bounced on a support and tested 40 yesterday. The VIX has been on a decline steadily and the rally was unchallenged. Yesterday's move has certainly pounded in some uncertainty at the very least on this rally.
Well, as discussed above, it's clear to everyone that the market will tank today. From Figure 1, I expect 845 (recent resistances) to be the resistance and 825 (top of downtrend, not shown here, refer to weekly review) to be the support. The line in the sand is at 835, the long term pivot price level. Who knows, maybe the market will surprise us again.
As of this moment, the ES futures is down 7.25 points. If this is to be a strong down move, then 835 should not hold today for the sake of momentum.
Update: Zero Hedge has an interesting post on VNO (a component of SRS) which might explain why SRS tanked 2 points in the last few minutes on Tuesday. Essentially, just before the close, there were two massive transactions with a premium above the market price, i.e. two huge trades at \$2 above market price. A sold to B above market. Then B sold back to A at same price. Nothing has really been traded, but VNO gets to print a \$2 higher price for the close.
[caption id="attachment_1269" align="aligncenter" width="500" caption="S&P 500 ETF"][/caption]
[caption id="attachment_1270" align="aligncenter" width="500" caption="S&P intraday"][/caption]
[caption id="attachment_1271" align="aligncenter" width="500" caption="CBOE Volatility Index"][/caption]