It seems almost beyond belief that last month we were running around barefoot in a VIX that was in the 30s. We have now returned to the moribund slog of a sub-teen VIX. It hasn’t broken its uptrend yet, but by God, this week is looking like a snoozer.
SPX made another new all time high yesterday and is now very close to a hit of my megaphone resistance trendline. I’m expecting some resistance there. The daily RSI 14 is approaching 70 and the RSI 5 is extremely overbought, though the last move up killed off the negative divergence there. SPX daily chart:
The rising wedges on Dow and SPX broke up on Friday after the BOJ QE expansion and held that break into the close. There is no longer any negative RSI divergence on the 60min chart and there never was on the daily, so at the moment there is no active reversal setup here on Dow or SPX. Dow 60min chart:
Only three charts today as I’ve had a lot on this morning.
One reason I do my optic run views on my seven main US equity indices is because while SPX is often the technical leader, by which I mean not that it moves fastest, but that it is delivering the cleanest trendlines/patterns and fibonacci retracements, that is not always the case. That leader at the moment is the Dow Industrials, and my first two charts will illustrate why that is.
The rising wedge on SPX that I tweeted on Tuesday night hit the very well defined wedge resistance (tweeted at the high yesterday) and then broke down on the frankly very predictable not really news that QE3 had ended in October as planned, and the usual assurances that the Fed would be fighting hard to keep interest rates near zero until the stars fall from the sky. Now those of you who have been looking at my work closely for a while might have wondered why I was giving strong weight to a pattern on SPX that was mediocre due to the poorly defined support trendline, and the answer to that question is of course that ………. SPX 15min chart: (more…)
I was talking yesterday about the 1976 SPX target and the trendline resistance that may well be there. SPX is likely to gap up today and we will see whether that target is hit today and if so, whether the trendline holds. SPX daily chart:
I last wrote about the SPX:VIX ratio in my post of October 15th.
As shown on the 20-Year Daily ratio chart below, bulls have pushed the price back up to close out this week at major resistance around the 120.00 level. Failure to hold 120.00 could very well see price re-test the 60.00 level, or lower…watch for panic selling of equities should the 60.00 level be breached and held.
The REAL test for sustained market bullishness will be whether price can reclaim and hold the 150.00 level, which was a milestone level this ratio reached before succumbing to pressures of the 2007/08 financial crisis.