Analysis of Tuesdays Session (by Drew)

Hello Slopers, Drew here from Tilt. As I discussed in our prior update, traders were looking for a breakdown in the VIX to help confirm the new intermediate highs on some of the key market indices. During Tuesday's session, the VIX closed below 20 for the first time since late August 2008.

Investors overlooked a weaker than expect GDP number early in the session, and overall prices closed near session highs. On Wednesday, we have some key economic reports to look out for that may move the markets:

MBA Purchase Applications (7:00 AM)
Personal Income and Outlays (8:30 AM)
Consumer Sentiment (9:55 AM)
New Home Sales (10:00 AM)

Turning to the 60-minute S&P 500 charts, the benchmark index hit a new milestone Tuesday as prices confirmed a new 52-week closing high. With the benefit of hindsight, we can see how prices tested key support at the lower end of the box four times before ultimately breaking higher. The measuring target of the 25 point intermediate trading range breakout takes us to the 1135-1140 area in the event of a follow-through. However, I would not be surprised if prices retested the previously broken resistance level as I have pointed out on the 60-minute candlestick chart.

Overall volume was relatively light during Tuesday's session, and declined over Monday's levels. Keep in mind we are moving into the holiday season, and overall action is usually very quiet during this period. However, it is still important to acknowledge the fact that for now, prices are moving higher on declining volume. We can see similar action on the NYSE Composite Index, which has not confirmed a new closing high this week unlike the S&P 500 and NASDAQ. Prices on the NYSE Composite have tested the 50 day EMA two times over the last couple of weeks, and currently trade near trend channel support.

The NASDAQ continues to lead the way higher as prices gained .67% during Tuesday's session. We are well outside of the key range I have been highlighting over the last month, and prices appear to be in the early stages of moving off of trend channel support. I have added the key intermediate resistance level to follow based on price measuring rules (green line), this level is approximately 2340.

The Dollar continues to move in tandem with prices, and has been doing so for about a week. However, prices are now trading near key resistance, and the trendline supporting the recent move is very steep. If broken, there would likely be some sort of a correction in prices. For an example of what can happen when a steep trendline is broken, take a look at a daily chart for GLD.

From the prior update, "The VIX is currently trading near support at 20.5, a key level that has been in focus since late October. A clear breakdown in the VIX would help to confirm a new uptrend in equity prices". On Tuesday, the VIX declined 4.6% and closed below key support at 20. The VIX chart found below, as well as eleven other market internals indicators can be found at our Market Internals page.