Just a few words describe U.S. market action, so far, this year, as depicted on the following monthly, weekly and daily charts of the SPX (N.B. the ‘input value’ for both the momentum and rate-of-change indicators is shown as ‘one’ and in histogram format to emphasize the following)…
- indecisive
- increased expansion/contraction (fluctuation) of volatility (compared with 2016 and 2017)
- lack of convincing directional follow-through on a weekly and daily basis
- in other words, profits have been taken, but there is a hesitation to commit to a larger-scale sell-off
While the the weekly and monthly uptrends have not yet been broken, the weekly action has been lacklustre/non-committal, and the daily uptrend has been badly damaged.
I’d keep an eye on both the MOM and ROC indicators to see whether they begin to expand, and in what direction (using the aforementioned input value), and for how long, to determine their directional conviction/sustainability in the coming days/weeks, as we approach year end.
Additionally, it’s worth monitoring the SPX:VIX ratio, as I most recently described here.
To support a convincing resumption of buying in the SPX, price on SPX:VIX will need to hold above the 150 level, the RSI will need to hold above 50, we’d need to see a sustained increase in the MACD histogram bars above its zero level, the PMO will need to rally and hold above its zero level, and the bearish moving average Death Cross formation will need to reverse and form a new bullish Golden Cross.
Otherwise, a drop and hold below 150 on this ratio could produce a larger-scale sell-off in the SPX (to, potentially, 2400, as I described here) on expanding (downside) momentum, rate-of-change, and volatility to, finally, break the weekly uptrend with conviction.
