Repeat after me. Gap opens are bad. Gap downs are good. Yes, it may have hurt to see the S&P 500 down -2% as we got close to the open this morning.
However, the S&P 500 put in the low for the day by 10:30 a.m. EDT and recovered to close down only -0.51% after being down -2% which was clearly a mental victory for bullish traders and a blow to the bears. Despite the recovery, the market failed to give investors the all clear signal.
The S&P 500 failed to closed above its intra-day support level at 2743.75 which we call the Erlanger Value Lines. This level is a key one that we follow very closely. The index did rise above that level until it failed in the last hour. The low for the day was 2691.43 on the S&P 500. This low was below the last one on October 11 which was 2713.29.
Interesting to note the CBOE Volatility Index (VIX) only made it to 24.66 today while on October 11th it hit 28.84. In theory, when the S&P 500 goes to a lower level so to should the VIX. It did not which is a big tell that stocks may finally be ready to head higher.
The S&P 500 has now traded lower for 13 days and is up only 4 days in October. Such action action ties it with several other months since the fourth quarter of 2012 as the most number of down days in a month.
Moreover, the S&P 500 has failed to close higher for 2 days in a row since September 20th. The last such streak was from November 10, 2015 to December 15, 2015. The action has been really ugly or as I call it "fugly". Can a turn be coming soon with such dismal statistics?
As we write tonight, the S&P 500 futures are lower by only -2.50 points while the Asian markets in early trading are mixed. Tomorrow is another key day to see if markets can begin to turn higher.
Until then, adios amigos.