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Here is an excerpt from our trading plan.
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Dip6 is launched
We have a bearish divergence right now where $SPX $NDX are acting as though they may recover from being down since 7/15. However, under the hood, market internals are collectively shouting “Dip6 is happening!”
Here are some specifics.
$VIX $VXN are forming a pattern indicating they will surge. $VIX can surge up into the zone of 17 to 17.5. $VXN can surge into the zone of 21 to 21.5. When $VIX $VXN sharply surge, $SPX $NDX $RUT will sharply drop further.
Market breadth are no longer confirming the bullish scenario. Both NYSE and Nasdaq A/D lines have been steadily marching down since 7/15. The percentage of bullish Nasdaq stocks has been dropping steadily since 7/3, NYSE since 7/15.
CBOE Put/Call ratio has been forming a pattern indicating it is ready to rise into selling territory. And it is nowhere near oversold yet.
Finally, $RUT has gone ahead with its steady march downward today. $RUT is the canary in the coal mine. It adds further confirmation that Dip6 is happening.
The rest of this article covers:
Support zones for $SPX $NDX $RUT at the end of Dip6
What to expect after Dip6
Our trading plan
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