Editor's Note

The VIX spiked to 25 and a level that cannot be sustained for long periods. Volatility spikes of this magnitude are typically followed by positive markets. There are exceptions as we saw in March but extreme sell offs always end quickly. It is the slow selling that can last for months.

The carnage today was not as bad as Wednesday but all major short-term support levels have been broken. In theory, we should just keep falling until long term support is reached, well below today's close. Theory rarely works well in practice and I believe the fundamentals are too good for the sell off to continue. Volatility actually increased at the close with a 400-point rebound and 300-point decline. That is good because it means investors are starting to buy the dip. They were still outgunned on Thursday but they may bring some support troops on Friday.

Microsoft only lost 25 cents and Intel 57 cents. There were five big cap techs that actually closed positive with decent gains. The green shoots are starting to appear.

The Russell 2000 continued to implode and closed at the lows for the day. Normally this would mean a continuation of the selling on the following day, at least at the open. The 1,540 support level is decent but not strong. The next stronger level is 1,494 and round number support at 1,500.

I have written multiple times about second half lows being made in the first two weeks of October. However, October normally posts a gain for the month. I did not really expect the 2H lows to occur this year after a relatively tame Aug/Sep and strong fundamentals but the market has decided to follow the prior trend.

 

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