Per yesterday’s update…
I’d like to review once again a daily chart showing the support parameter to the ‘top-test’ scenario. The reason we should be aware of support is because complacency has already returned to the markets and also because if the rest of the plan is anywhere near on target, the next major move would be down, not up even if SPX does test the January high first.
As for the shorter-term rally, the hold of the 200 day average was the start. Then the break above the 50 day average and finally, the green dashed trend line put the ‘M’ top-test scenario on the front burner ( “boiling frogs” and all). The area where the lateral support, the SMA 50 and the trend line meet is key support to keeping a top-test scenario in play (2673 +/-).
Here is the updated SPX chart. Today’s low so far is 2678, which holds the short-term support zone, the trend line and the SMA 50.
As for the lack of volatility, the VIX has spiked 29% and I’d say the frogs are no longer on slow boil. Some of them are jumping out of the pot it’s so hot! Now, that may not be a bad thing because sleepy investors were a risk to the rally as we have been noting.
Here is some of what investors are getting treated to in the media today.
Now, as someone with a preferred plan that could see next major move take 25% off the S&P 500 I don’t want to be cavalier about this. But I do want to be the guy saying we should not change the plan until the plan changes.
We had an update yesterday showing the parameters on the S&P 500 and today those parameters are being tested; and it is happening with an alarming news cycle right out front. I’d be more than happy to switch bearish if the market goes that way but the point of this update is to give you pictures showing that it has not yet gone that way.
The Dow is in a similar stance to the SPX, although it can test its SMA 200 (24,387), which is rising firmly. NDX and SOX are completely intact to the short-term uptrend and then there’s the Russell 2000 simply testing its Ascending Triangle breakout.
Stocks are correcting with the media bull horn letting everybody know how bad it is out there. VIX is spiking and while this could be the beginning of a rally failure, the trend is still with the bulls in the near-term. What’s more, the fast asleep VIX had been a bear ally as it is a condition for a correction. But if this proves to be a pullback within an ongoing rally the VIX spike would prove a sentiment refresher.