One of my favorite studies is one that isn’t seen much, and it’s called a ribbon study. It’s the application of a large quantity of moving averages (sixteen, I think) that are relatively close in periodicity, thus forming a ribbon-like structure around price that twists and turns. It tends to get denser (and darker) at inflection points (or at least points of inactivity).
I applied it to the VIX, as shown below, hiding the price data itself and showing only the study. I’m not going to pretend any great insight leapt out of this chart, but maybe it will for you. If nothing else, it’s real purty.
The swing high may be in, and price has a couple of decisions to make early this week to show us whether that is now the case. All charts were done either yesterday (RTH charts) or before the open this morning (futures charts) for subscribers at theartofchart.net.
SPX is on an hourly RSI 14 sell signal, and short term rising wedge support was tested twice and held as support on Friday. That has broken this morning, and subject to any short term topping process the next big trendline target is larger rising wedge support, currently in the 2455 area. SPX 60min chart:
Stan and I are doing the first of two ‘Trading Toolbox’ free educational webinars an hour after the close today at theartofchart.net, and this one will be looking at the use of bollinger bands in day and swing trading. If you would like to attend then you can register for that on our September Free Webinars page.
After an interesting start this morning ES settled down into the comatose tape that has been characteristic of afternoons recently. The morning was definitely interesting though, with the ES rising wedge support that was tested perfectly at the low yesterday breaking this morning. That hasn’t followed through yet, but may follow through soon, ideally after just one more all time high retest. ES Dec 60min chart:
If you don’t immediately recognise the title for today’s post then I must first warn you that your knowledge of Lewis Carroll’s literary works is dangerously deficient.
So why am I thinking of Alice in Wonderland today? Well it is Fed day, and for me the Fed always bring Wonderland to mind. I was talking to my older son a few weeks ago explaining that in the same way that lawyers trained for years to achieve a state where they could swallow (figurative) camels and yet still strain at gnats, economists went through a process where after years of patient study that seemed to require at least a PhD, they achieved a state where measures that looked reckless or even suicidal to the less trained eye were revealed as both sensible and necessary.
He asked whether the Fed’s track record at steering the economy in the past was impressive, and I told him that it had delivered a succession of ever greater disasters over recent decades. He then asked why people still nonetheless trusted the Fed to deliver policy, and I replied that people had to believe that the Fed knew what they are doing, as the alternative was just too terrifying. I added that the Fed never admitted to making a mistake, which reassured many, and that Ben Bernanke had an impressively bushy beard that had inspired confidence, though Yellen had needed to manage without one so far for technical reasons. (more…)
Wednesday, being the “big event” from the FOMC, is all about the dollar. The USD has been beaten down relentlessly ever since 2017 began. This is going to be a “make or break” day for the buck, since a strengthening dollar will torpedo gold (and probably help stocks) whereas a new leg in the dollar bear market will probably have just the opposite effect.
After a memorably boring four day range consolidation Tuesday through Friday last week, SPX finally broke up and tagged 2500 at the close on Friday. This should follow through to the upside, short term at least, and I have some targets to watch, and a warning that this move over 2500 may well not last the week.
On SPX the obvious trendline target is rising wedge resistance, currently in the 2514 area, and a strong match with rising wedge resistance on the ES chart. On the daily chart (not shown below), there is a possible RSI 5 / NYMO sell signal brewing, but the negative divergence is slight and might well be lost on a green close today or tomorrow. SPX 60min chart:
The triple-bearish-on-energy fund DRIP has lost a lot of ground in the past month or so, but looking at the Bollinger Bands in SlopeCharts (as well as the supporting trendline), it seems like an opportune place for it to find strength.