The S&P 500 settled at 2607.75 and has lost 7.6% since Thursday’s close. Today’s session stalled at a high of 2763, and failed to hold the key level at 2757, a trend line and Friday’s close. Price action began cascading below the overnight low of 2733 and all bets were off once our rare major four-star support at 2690-2700 was taken out.
February is the shortest month of the year and there is no specific market insight to it such as the Santa Claus rally or January effect. It is one of the poorer performing months in all three major indexes: number eight in the Dow Jones and Nasdaq Composite and number nine in the S&P 500, but averages moderately positive returns in the Dow and S&P with a more robust 0.73% in the Nasdaq.
We see today that the E-mini S&P 500 futures have broken their 2018 upward supportive trendline. Granted we are only 30 days into the year, so its not like this line has been supporting this market for a year, but it is still significant.
Last month we discussed the complexity required in testing and optimizing Arima-Garch trading models (see “Arima-Garch Out of the Lab, Into Trading,” Modern Trader, January 2018). We backtested our Arima-Garch hybrid model discussed last month to the S&P 500. Here is how it did.