It looks like we have another VXX shorting opportunity ahead of us. VXX touched the top of its downward sloping channel and fell away. If it breaks below that trend line we are set up for a nice trade. However, if we push higher this week, we are setting up for a very nice short trade.
VXX struggles outside of its channel.
There were three significant technical landmarks for me yesterday. The first that double top support on SPX broke down, breaking the third and last support level I gave last Friday morning. The second was that the daily RSI 5 closed under 30, so the daily RSI 5 / NYMO sell signal I’ve been following has now unambiguously made target, though the historic stats on these nonetheless further support that the SPX double-top that has just broken down should make the pattern target in the 1937.70 area. The third was that a daily lower band ride was confirmed with the strong punch below the daily lower band.
So what now? Well the odds favor a lower close today, but not another trend day down. We may see a modest rally close or perhaps a flat close as a less likely but possible alternative. SPX should test the lower band at some point today, and that is currently at 1975. Yesterday’s low is very unlikely to hold and all longs should be counter-trend now until the double top target is hit. SPX daily chart:
That was a strong rally yesterday, and the long bull move over the last few years has left many of us with a very strongly conditioned response to any strong move up, to jump on the long train in the confident expectation that it wouldn’t be turning back down anytime soon. Don’t get me wrong, that conditioned response has served everyone well in this long long long bull run, but in this particular case it needs to be suppressed until we see some actual evidence of a bullish break, and we haven’t seen that yet.
In terms of the rally yesterday it followed the roadmap I gave in my post yesterday morning almost exactly. There was a lower low in the morning, with a low just 0.15 above 1978.48 support, then a rally to 1999.79, just 0.21 under the top of my 1995-2000 target zone. The close was 0.68 below the 50 hour MA, and 0.35 above the daily middle band, so a close directly on the main resistance levels I gave in the morning. SPX daily chart:
Last Wednesday I was warning that the odds were better than two to one that SPX would make a marginal new high and then come back to make a lower low, and SPX came within four points of making that lower low yesterday. You can see that post here. SPX hasn’t made that new low yet, but the RSI 5 / NYMO signal that I was using to make that prediction has now made target as the daily RSI 5 closed at 30.84 yesterday, and there is a visual hit of the 30 level on the chart, so I’m treating that signal as completed to target.
That isn’t quite the end of the story though, as there is still the matter of the lower low outstanding, and also the matter of the double top that has now formed on the SPX chart, targeting the 1938 area on a break below the last low at 1978 48. (more…)
Excerpted from the September 21 edition of NFTRH, #309, which went on to do extensive technical and macro work across all the key markets…
Last week we noted that Uncle Buck would be front and center in the analysis, not because the strength in the (anti-market) currency was not expected (it was), but because our big picture theme of an ongoing economic contraction had remained intact (ref: gold vs. commodities ratio) over the long-term.
It is important here to remember that NFTRH would only be on its big picture macro themes as long as indictors implied they are still viable. I will be damned if I will let us follow a Pied Piper off an ideological cliff, no matter what readers (including me) might want to hear. We must dedicate to know what is happening, not what our hopes, dreams, egos, etc. think or worse, hope will happen. (more…)
Our friends over at ZH have been touting the fact that a “death cross” is looming with the Russell 2000. Well………….kind of.
What they seem to be highlighting is the fact that the simple moving average is about to do a crossover, which it hasn’t done since the last meaningful market fall three painful years ago.
SPX touched the daily upper band at the high yesterday and also tested the 50 hour MA at the low, so the two key targets that I gave yesterday morning were both made. So what now? Well I’m still looking for a (hopefully marginal) new all time high, so I’m looking for at least one more test of the upper band, but once there SPX is at a fork in the road and I’m going to talk about the bull and bear scenarios there.
The daily bands are pinching sharply here and that means that there is a very high probability that SPX is shortly going to start either an upper or lower band ride lasting at least three days and possibly much more. I’ve marked the last four daily band pinches on the chart below. The direction is unknown though the odds I gave yesterday of a downward resolution here at 2 to 1 is where I see the odds of the band ride here as well. What this means in practical terms, given that SPX tested the daily upper band yesterday, is that if we now see a strong new high, then this is most likely resolving upwards. (more…)