alice

NFTRH; US Stock Market Technical Situation

Yesterday’s hard reversal of Tuesday’s bullish move was an unpleasant development for the bulls but this morning, plucky as ever, they are back at it trying to bull the market again (SPX +13.50, NDX +27.50, Dow +87).

Recall that we were using the EMA 20s (orange dotted line on SPX and blue lines on NDX and Dow) as a key for the short-term.  On Tuesday SPX and Dow popped above the EMA 20 but the NDX stopped right at it.  NDX is a leader.

In the hype department, the Golden Cross has probably by now sucked in all who believe the bromides that the media feed them.  There was also a Golden Cross in December, which preceded a mini crash.

spx.ndx.dow

NDX is precariously positioned below both the 50 and 200 day moving averages.  A break above there puts the bulls back in play but this remains bearish below the 50 and 200 (not to mention the EMA 20).

ndx

As noted for the past few weeks, the recovery rally out of February went longer and stronger than originally expected (in SPX and Dow, w/ NDX a negative divergence) but the bears held the trend by a hair by not making higher highs to Q4 2015 (except for the Dow, which made a marginal high before reversing lower and was negatively diverged by the Transports).  None of the indexes made all time highs.

The SPX/VIX chart continues to show a complacent environment that would be ripe for a new downturn.

vix

Bottom Line

The market is bouncing in pre-market after taking a bearish turn yesterday.  The bears remain in control of the trend, tattered as they are.  I actually thought about capitulating on my SPY short (still my largest position) on Tuesday but then noted the red line on the top chart and thought ‘nice try bully, I’ll hold short a while longer’.  Against this I continue to hold some longs, at least pending a market breakdown.

Said breakdown on the short-term would be indicated by making a lower low to yesterday’s low.  At the moment however, we are managing a pre-market bounce attempt, which should not make a higher high to yesterday in order to keep the bears in control.