Scott Burrill - Market Notes

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Levels for Monday

Feb 11, 2018

Good Afternoon: 

Markets have changed tone significantly in two weeks when compared to my weekly trend signals below.

Week Ending January 24:

Week Ending February 9:

We have traded outside of the weekly option implied move now 5 of the last 6 weeks in 2018 and Volatility of Volatility (VVIX) remains elevated at 167. This is highly inefficient and reinforces the shift in regime mentioned several times in 2018. We need to get back towards 120 quickly for what we expect to occur discussed below. 

Implied Volatility remains stretched and elevated in the short-term. For the coming week, the option implied move in the SP500 is + / - 94 points. On Monday, through the close alone, the implied move is + / - 49 points.

As mentioned, Volatility is back and Trends at the Daily and Weekly horizons are down across the board, but tactically, we are oversold on several metrics with, as an example, 93% of the SP1500 below its 20-day average, and markets exhibiting stopping action at important levels and common moving averages which become self-enforcing trigger points.

Our smart money flow metrics, after reaching extreme distribution, were cumulatively positive with accelerating velocity beginning at 1:47 PM EST.

At the forefront, we will look for follow-through to the upside, a positive test and conversion of the Weekly Up / Down Magnets, and travel towards the pre-computed levels which also offer highly targeted algo confluence zones such as 2695.25. As we often write, if what we expect to occur doesn't, then the opposite reaction is often more violent. Therefore, we would look to rapidly test 2500 should 2600 fail to hold support in the SP500.

As implied correlation reverts over the intermediate term, focus will turn yet again to single securities for new leadership. 

Focus is therefore on follow-through, the Financial Sector, Dollar, and Bonds.

All the best,

Scott

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