The trading system signals for Friday were in the negative with two days in a row of some harsh chop. There has been three legs of selling that can clearly be seen in the Nasdaq. On July 11, July 17, and July 24. Time symmetry is about a week apart. If this lines up again for a fourth leg of selling, the FOMC July 31st meeting (or day before) could generate more selling. It is also possible that FOMC is a pivotal reversal day.
We don't trade on FOMC days, however, it could setup some nice trades for a new month. Next week, FOMC Day Wednesday is the last day of July while Thursday will be the first day of August.
Each time we see a leg of selling, there are 3-4 days of chop afterwards. you can see the dip buyers come in and try to capture a bounce. They have been getting "rolled" on since July 10. It has affected some of our strategies as well and V-Reversal had one of its more challenging weeks.
The strategies are struggling because of the choppy nature of the downtrend. There have not been many smooth downtrends the last few years. Markets typically have some seasons of smooth downtrends and selling. We are extremely overdue for some consistent short trade day trade patterns. The excess liquidity and mindset of market participants to buy the dip still persists. What has been normal in previous decades (normal selling cycles) is considered abnormal in the 2020's.
We have had a few days of extended selling in the indexes since July 10th.
The hypothetical results for today are:
One Million MNS 130 = -$10,351 250K Portfolio = -$2,070
Stock Index Portfolio 18 = -$3,010
The drawdown entry alert for the Stock Index Portfolio remains and is approximately 18.8K, or 6K from the hypothetical worse case drawdown. The Stock Index Portfolio 18 is at the breakeven point on the month.
The drawdown in the One Million MNS 130 is right at 20K or 2%. We are waiting for a 3% drawdown entry alert to start.
The Nasdaq 100, Nasdaq Composite and S&P 500 were all up about 1% and the VIX settled below 17 today. It wasn't much of a Friday bounce considering the recent choppy sell off.
The Nasdaq 100 is about 8% off its highs and has given back 37.5% of its gains on the year. The low in the Nasdaq 100 this week was 18,721. 18470 is the 50% pullback number for gains on the year.
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