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“Offense sells tickets, but defense wins championships.” was a quote from the legendary football coach Bear Bryant from Alabama.   It applies to managing money too as Paul Tudor Jones once said “At the end of the day, the most important thing is how good are you at risk control.”   As a long term hedge fund trader, it was evident that our best years were those years that we minimized losing positions.  The winning positions were expected as we did a ton of initial work from many angles.  Losing positions were not expected.  But they happened and the quicker we got out the better off.  When I do my market work I weigh a lot of data, resources, and combine them with some hard earned experience (ie painful lessons).  I've been cautious for a while as the evidence has been skewed that way.  The probabilities for downside have been high based on the possibility that those extreme sentiment readings in January couldn't last.  Add the many upside DeMark exhaustion signals on daily, weekly, AND monthly time frames across the board on indexes, sector ETF's, and many stocks.  If you know these factors and indicators have better than decent odds of higher risk, wouldn't you prepare and move to defense?    This is going to take time to find a solid bottom in the markets, be patient and defensive.  Strong rips will happen which is indicative of a bear market so manage risk tight.  If you've followed some recent option put trades, I still have all the April puts and although I've been tempted to take some off (like at the lows today) I do believe this will continue lower in the coming weeks.  

Notable:

• US Markets - Breaking some support yet sentiment remains too high for a bottom
  
• European Markets - Some more downside exhaustion signals which is a positive
  
• FXI Hong Kong China ETF - Doesn't look so good
  
• EEM Emerging Markets and Tencent - Risk to the downside due to weighting ~8%
  
• Bloomberg World Index - A good look at a lower high
  
• Investment Grade and High Yield Bonds - Making A TON of new 52 week lows
  
• VIX Index - Looking higher on day 7 of 13 with an upside Countdown
  
• Consumer Staples - A hiding place
  
• Bond Sentiment - Not much to report
  
• DeMark Screens - Seeing more downside exhaustion signals (red 13's downside)
  

SPX bullish sentiment is at 42% and not oversold

Here's a link to the Hedge Fund Telemetry website market sentiment page with 40 charts of sentiment with equities, bonds, commodities, and commodities updated each day.   

SPX broke the 2700 level and is at the TDST green dotted line as support.  VWAP on the SPY from the 2/9 low is at 271.66 and that means the majority of volume from the February lows occurred higher - thus people are trapped higher.  

Nasdaq bullish sentiment 42% too.  This should work lower

QQQ broke the 50 day pretty hard today and has since bounced pretty hard but that's typical as the BTD people are not fully broken yet.  The QQQ VWAP from the 2/9 is 166.64 and will be resistance if it gets back up there.  

The Dow gapped down and has been the weakest of all the major US indexes

Euro Stoxx 600 triggered the downside 13 exhaustion today.  Let's see if a price flip can happen soon (close over 4 previous closes.)

DAX went right to the green TDST dotted line at 12,075 support.  I am in no hurry to buy Europe

Italy is on day 12 of 13 with its Countdown.  It's a good sign to sell all of these starting to bottom but again I'm not in a hurry to buy

UK FTSE 100 did get the downside 13 Countdown too.  Keep in mind this a down wave 3 move and the next wave is a shorter wave 4 bounce followed by wave 5 which will go even lower.  Jason Perl who wrote a great book on DeMark never trusted exhaustion signals occurring in wave 3 and I agree.  

Tough day for the FXI and it's not done going down.  Its on day 8 of 13 with its Countdown

EEM has been popular with many retail investors in the past year as it's done very well however there is risk due to portfolio weighting.  

700 HK Tencent is the largest weight 6% in the EEM and they reported a surprisingly weak earnings report and it was down 5%.  This was a stock my old firm bought in 2005 and if we still were long, we would have a ginormous position.  The second risk is Naspers a South African company (5th largest weight) is the largest shareholder of Tencent announced they are selling $10 billion of their stake.  They invested $32m in 2001 in Tencent and it's now worth... $175 BILLION.  Again, I wish my firm still had our stake and also wish my firm was still operating.  

The weekly chart of Tencent shows why retail investors have been so excited about the EEM.  This has a weekly upside exhaustion signal in play as well monthly and quarterly upside exhaustion signals too.  

The weekly of the Bloomberg World Index like most indexes around the world (ex Nasdaq) has made a lower high.  

Both Investment Grade and High Yield bonds are seeing a spike in new 52 week lows.  This is not bullish for risk.  Thanks to my friend Teddy Vallee for the charts.  

The VIX Index is poking its head above the moving averages again and is on day 7 of 13 with an upside Countdown.  I was just pinged by a subscriber on Bloomberg asking if I thought this was an orderly move lower in the markets.  I said wait until we break today's low again.  

Consumer Staples XLP ETF has a downside exhaustion and the DeMark signals have been quite good.  Keep in mind this is a wave 3 downside exhaustion and I expect lower levels but perhaps a bounce first or at least you can pair up a KO or PEP with something outside of the sector.  

Bond bullish sentiment is at 33% and I am still holding off on buying bonds but am getting closer.  

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