The last time I posted (Nov 29th), I shared the VXV:VIX ratio and suggested that the S&P500 was likely to continue it’s grinding uptrend unless something changed. I also shared HYG as a potential short which I unfortunately missed, but turned out much better than I expected.
As it turns out, the grinding call was the right course of action as the daily 20MA held the following Monday and ground its way back up to the highs again. This past week, price appeared to be doing the same until Tuesday, December 9th which broke the 20MA and delivered a lower low on the hourly charts. Despite the very bullish looking candle, the depth of the decline put me on guard for further selling. (more…)
I last wrote about the SPX in my post of December 3rd.
Here’s a Daily chart of the most recent market action on the SPX as of Friday’s close. Price ended around the near-term support level of 2000. You will note that this level sits at a confluence of price and channel support, which has been broken on the last major swing down, during which, the Momentum indicator made a lower low. I’d say that if price re-tests the 1800 level and fails to hold, we could be looking at a possible major decline ensuing, especially if the Momentum indicator makes a lower swing low. Whether we see such a scenario happening before the end of the year remains to be seen…perhaps not until January. (more…)
There is a yawning gap taking place between high yield instruments (such as HYG and JNK) versus the equity market in general. My view is that this spread will reconcile, which is a polite way of saying that stocks are prone to some hard-core selling.
TO GO LONG
CCOC – Consecutive Closes Odds Calculator (TIME EXTENSION ANALYSIS)
Yesterday the market closed down again and made a lower low, but futures started to rise overnight, so it’s possible to have a rebound today. As you can see in the TIME EXTENSION ANALYSIS below, the DAILY time period shows that after 3 days down in a row the market closes the next day up in 87.67% of the times. This means in the largest majority of the cases the market does not go down more than 3 days in a row. Does that mean it cannot go down another day? Obviously not, it can go down 4, 5 or more days in a row, but these events (on average) are quite rare. Statistical research can show what is most possible but the exact prediction of the future will always escape us. We use our research to make bets on what it is most likely to happen (although it may not always happen). (more…)
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.
In a mere 19 trading sessions, the VIX lost nearly two-thirds of its value. Surely that’s some kind of record. I noticed, however, that the VIX has been making a series of higher lows (note the yellow highlights). Just sayin’.
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: