monday update

SHORT TERM: wild swings to start the week, DOW -41

Overnight the Asian markets lost 2.2%. Europe opened lower and lost 0.7%. US index futures were higher overnight and the market opened at SPX 1794. The SPX had closed at 1790 on Friday. In the opening minutes the SPX hit 1796 and began resumed its decline. At 10am New home sales were reported lower: 414k v 464k. Around 10:30 the SPX hit 1782, bounced to 1788 by 11am, then dropped to 1773 by 12:30. With a slight short term positive divergence the market started to rally. At 3pm the SPX hit 1794, then pulled back to end the day at 1782.

For the day the SPX/DOW were -0.40%, and the NDX/NAZ were -1.00%. Bonds lost 8 ticks, Crude slipped 80 cents, Gold dropped $13, and the USD was flat. Medium term support remains at the 1779 and 1699 pivots, with resistance at the 1828 and 1841 pivots. Tomorrow: the FOMC starts its meeting, Durable goods orders at 8:30, Case-Shiller at 9am, and Consumer confidence at 10am.

The market opened a bit higher today but could not generate any additional buying, then it headed to new lows for the decline. Without a noteable rally from SPX 1829 the market hit 1773 by 12:30. At that low a small positive divergence appeared, as the market found support in the lower end of the OEW 1779 pivot range. Just another two points lower and it would have broken through medium term support. And another four points below that, broken the uptrend as well. Nevertheless it has been quite a decline from SPX 1851 to 1773, and there is no clear sign that the selling is over.

Typically during a downtrend short term RSI can bounce to neutral before heading lower, with price, again. We hit neutral on today’s rally. Should it reach overbought it would improve the prospects that the low of this decline is in. Also, the short term MACD has reached oversold levels normally associated with ongoing/ending downtrends. Since a downtrend has yet to be confirmed this too can be considered a negative.

Short term support is at the 1779 pivot and SPX 1768, with resistance at SPX 1800 and SPX 1814. Short term momentum bounced to neutral after an extremely oversold slight positive divergence. The short term OEW charts remain negative with the reversal level now SPX 1812. Best to your trading the FOMC in this volatile market.

MEDIUM TERM: uptrend weakening

LONG TERM: bull market

CHARTS: http://stockcharts.com/public/1269446/tenpp

About tony caldaro

Investor
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108 Responses to monday update

  1. blubrd67 says:

    Tony, does the fact we didn’t cross the midline on RSI today increase the likelihood of furhter selloff?

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  2. blackjak100 says:

    Still looks like we need a 5th wave down towards sub 1770 before a multi day bounce takes place.

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  3. blubrd67 says:

    McMillan today:
    Volatility indexes VIX -6.89% XX:VXO -2.88% are quite interesting. VIX finally began to shoot upward — we call that “spiking.” VIX is officially in a spiking mode (a look at the chart confirms that). But a “spiking” mode is actually a precursor to a buy signal. When VIX reverses back down more than 3 points, that would complete a buy signal.

    The construct of the VIX futures took a “hit” during this recent bout of selling, but still retained much of its bullish nature. Nearly all of the futures settled at discounts to VIX on Friday. That’s something we haven’t seen for a long while, but that alone isn’t bearish. What would be bearish would be the term structure taking on a negative slope, and it hasn’t done that. In fact, the slope of the term structure is completely positive, with March trading higher than February, April higher than March, and so forth. Frankly, I find it a little surprising that Feb VIX futures are such “dogs” that they haven’t even been able to exceed the price of March futures. While I don’t have rigorous proof of this, it seems to me that in the past when the front-month VIX futures were at such deep discounts, that was a bearish thing for the market over the intermediate-term.

    One other point is worth noting here: The end of January is traditionally a very bullish period. Moreover, the first trading day of February is the most bullish of all the months. Hence, there is some strong short-term seasonality about to take place.
    In summary, these completed sell signals seem to augur an intermediate-term bearish move, but the bulls have other plans. If these buy signals (January seasonal, VIX spike peak, and modified Bollinger Band) are successful, the bearish threat will be over.

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  4. tommyboys says:

    Tapering just may lead to lower rates as markets normalize and true deflationary forces reassert themselves. This deflationary cycle is likely with us through sometime in 2016…
    http://finance.yahoo.com/blogs/daily-ticker/fed-tapering-will-lead-to-lower–not-higher-rates–dan-alpert-213546835.html

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  5. Enjoy the triangle because when its done we going to 1760.

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