While the stock market does its wax on, wax off, wax on routine, two anxiety indicators continue to flag in consolidation. They are consistent, orderly and as long as they are flagging the market is probably okay. But these are still bullish looking consolidations.
The stock market is in a middle ground on the bounce, but as noted at Biiwii last night, SOX kept its short-term leadership over SPX, despite the nasty reversal. Then voila, the market goes green again today.
Nothing has changed. As I see it…
- The stock market is on its bounce and is still at Resistance #1, which was 1975, per the two ‘bounce’ levels plotted over 2 weeks ago.
- It is in consolidation in preparation for a try at Resistance #2 at 2040 or a failure to [1875 (ish)].
- The bull case has sentiment and renewed market leadership (with Semi’s and Biotechs looking more constructive, per a previous update).
- The bear case has Mr. VIX and Mr. GSR up above, in flag-like consolidation. If those flags break upward anew, pressure will come upon the markets.
- VIX target range has been lowered to 18-20 after original 20-22 was registered yesterday. GSR is less 1-for-1 with the stock market and could muddle around before activating any bearishness. So lets favor the VIX support levels as a guide.
As has been the case all along, the ‘bounce’, as grinding as it has been, is still intact and so we can still anticipate a possible test of 2040 resistance on SPX. The 1993.40 (confirmation) and 1903.07 (failure) parameters on the chart above continue to be key to the bounce scenario. As long as VIX continues to consolidate.