First the scare, then the tear. Last Thursday’s price action was essentially mimicked today only with less violence. Below is an excel spreadsheet I use to record the market internals. The important columns to note are the Trin and the NYSE % change. The light orange dot represents a bearish Trin close on the day, the following day we had a bullish Trin close, but a bearish market. This is an extreme warning signal. When we see Trin readings above 2.0 and fail to rally the next day we are headed for an extreme slide which happened the following day (see red dot).
Where to go from here? We continue to stress the important of remaining delta neutral or at least hedged if you are delta long. We will be looking to add shorts/puts on any bounce.
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