Market Internals:  Volume was about average today. Breadth was strong with 445 S&P advancing issues vs  42 declining.

SPX Market Timer :  All three timeframes rose today. The Intermediate line gained inside the Upper Reversal Zone, still showing a Bullish Bias. No leading signals now but very close to another bearish cluster.

DOW Theory: The SPX is in a long term uptrend, an intermediate uptrend, and a short-term uptrend. The RUT is in a long-term downtrend, an intermediate uptrend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.

VIX: The VIX fell 13.87% to 17.70, inside the bollinger bands. The VIX ratio is .96 and is below the mean for the first time since December. The RVX fell 10.06% to 20.93 and is inside the bollinger bands.

Fibonacci Retracements: We are still tracking the Fib Retracements of the main swing lower from the 2080 level down to about 1812; the last overhead target is the 61.8% Fib retracement at about SPX 1979 and represents Custer’s Last Stand for the Bears..

Support/Resistance: For the SPX, support is at 1810 and 1800 … with overhead resistance at about 1950, 2000 and 2080. The RUT has support at RUT 872 and 958 with overhead resistance at 1100. The RUT, SPX, and DJI charts are now all showing a “Death Cross” with the 50ma below the 200ma.

Fractal Energies: The major timeframe (Monthly) is super-charged again with a reading of 64. The Weekly chart is reflecting the recent linear trending behavior by showing an energy reading of 48, and is starting to recharge due to recent chop. The Daily chart is showing a level of 35 and is now showing technical exhaustion after the strong, linear move off of the 1810 low. The Intraday chart is just going to follow the higher-timeframe energies at this point, but it’s also exhausted. The market has the potential for another large move, however we might see a pause in the short term.

Other Technicals: The SPX Stochastics indicator flattened at 90, overbought. The RUT Stochastics indicator flattened at 96, overbought. The SPX 5/34/5 MACD histograms rose above the signal line, showing a return of upside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 1829 and resistance at the upper band at 1984 and is at the upper band. The RUT is inside the Bollinger Bands with its boundaries at 950 to 1058 and price is at the upper band.

At this point index charts are one-by-one falling into a Bear Market, so it’s now much less of a mystery as to what we’ll see occur in 2016. Even if the SPX and DJI avoid becoming a true “bear,” we will still see very volatile, difficult price action for likely the remainder of 2016. The price has now re-tested the January lows on the SPX, and now looks to be playing out as expected into a rising wedge pattern, although this has not been confirmed yet. The energy is there for this to happen. We also have to consider the possibility of a very strong rally to the upside similar to the October 2015 moonshot. 

Here are the current positions in play with 12 trading days remaining in the MAR cycle, and 32 trading days remaining in the APR cycle::

• SPY MAR 157/159 Bull Put Spread (1/15) was entered for a $.16 credit; negotiated exit debit is currently $.01.
• SPY MAR 153/155 Bull Put Spread (1/20) was entered as a rollout entry from the FEB SPY trade for a $.16 credit with a 2x sized position. This position is currently showing a negotiated exit of $.01.
• SPY MAR 206/208 Bear Call Spread (2/2) was entered for a $.15 credit with a half-sized position. The current negotiated debit exit is $12.
• SPY APR 168/170 Bull Put Spread (2/23) was entered for a $.15 credit. The current negotiated debit exit is $.07.
• SPY APR 208/210 Bear Call Spread (2/25) was entered for a $.15 credit. The current negotiated debit exit is $.23.

Defense:  I will play the current positions by Static Risk Management.  The SPY MAR series has a tremendous amount of room to work with, an effective 470 point wide iron condor.The APR position has an effective width of 380 points; we have increased the wingspan due to effective legging-in. Nothing for us to do at this point, however if the SPY 200 level is breached then I might consider closing down the MAR call spreads.

Offense: We are finished with MAR cycle offense and we just finished setting up APR offense. I’m expecting that volatility will “normalize” in the short run, although today’s price action did not agreed with that thesis.

Thoughts on current swing strategies:

• 8/21 EMA Crossover – This signal has crossed to the upside, however I already have a SPY swing trade in place with the SPY MAR 200/201 debit spread.
• RSI(2) CounterTrend – This setup is best played on stocks above their 200dma. This signal was showing earlier in February but I will not attempt to use it.
• Squeeze/60 Minute – I’m not following this indicator/timeframe in this current market.
• Daily S&P Advancers – if I see the number of daily S&P500 advancers drop into single digits near the close of any trading day, I will go long shares of the SSO.