The year is practically over for most investors. Most will remember this year, especially the autumn, as one of the most frustrating times in their careers. Carnage in the hedge fund space has resulted in several funds shutting down, including some that have been around for years.
Market price action has been extreme, but not surprisingly, majority of investors continue to focus on “being right” instead of adjusting risks quickly and dynamically. As we have said before, “I’d rather be rich than right”. Hence, the inadequate risk management and lack of methodology has simply killed performance for many this year.
Nothing will change as we enter 2019, although people love to think in yearly terms. Momentum is horrible, but will this ever change? Longer term, nobody knows, but for the short term it is important watching charts and levels closely. Earlier this week we wrote;
SPX broke the huge 2600 level. Next stop is 2500, and (if) then the 2400 level. Do note that the SPX did trade slightly lower during the February lows, but the close today is lower, despite the last-minute mini bounce.
SPX is currently trading slightly below the 2500 level we mentioned. This is a level to observe, but the far bigger one to watch is the 2400 area. This bear is big and mean but expect violent bounces as well. We navigate with 2400 as the first bigger support and 2600 a firm resistance now.
NASDAQ futures are trading in a negative channel that has been in place since the highs. Note we are approaching some short-term support levels soon. The “ultimate” support area is down at the 6000 level.
Nikkei is an index stuck in a big range. Despite the recent move lower, this index actually lacks trend. 20k is a huge level to watch.
Eurostoxx 50 continues trading badly. All moving averages are rather negatively sloping. The index is back to late December 2016 levels. 3000 is a huge level.
Mighty DAX continues to be the dog of European indices. We are trading at some short-term support levels, but price action is all but happy. The big support is to be found at the 10k level, while 11k now represents a big resistance level post the break down a few days ago.
The important VIX curve we have been showing multiple times this autumn remains in “stressed” territory. Note the slight “panic” move yesterday as the spread between the 1 versus 6 months VIX futures spiked. Was that a VIX shake out?
Source: charts by Bloomberg
A new year won’t change anything in the global economy, but it will give stressed investors some rest. Adequate risk management is the only way to handle these markets. More on the topic here.