A review using the daily chart. We have asked SPX to close the week at or above the convergence of the lateral support shelf, the SMA 50 and the green dashed trend line in order to maintain the ‘top-test’ view.
SPX got a hard test on Tuesday, a hard bounce on Wednesday and then a whipsaw back down yesterday (Fed SOMA/QT day). All normal and some would say, even predictable. The play this week, whether by coincidence or otherwise, has been that Treasury bonds have been bid up and stocks and other assets bid down, giving the Fed a nice, comfy environment to sell bonds into (i.e. a flare up of risk ‘off’ investor behavior).
The support parameter continues as noted but the upside trigger to the would-be top-test is a higher high to last week’s high, which was 2742.24. US and global stock markets are positive this morning, pre-US open, but if this extrapolates to the weekly close we will not have resolution to either a loss of support or a break above short-term resistance.
The reason I am micromanaging this is because I am leaning toward a trade-able negative move in the market in the coming weeks or couple months with the question being whether or not it will continue bouncing toward a top-test in the interim.
The previously sleepy VIX provided a nice launch pad for this week’s volatility and this can now be looked at a couple different ways. 1) Volatility has just started to get back in motion as a rocky summer season begins or 2) the spike in the VIX was another of those bull refreshers that provide a short-term contrary sentiment benefit.
If VIX is taking on the posture of a bull flag, more short-term volatility would be indicated. But it could just as easily drop to fill Tuesday’s little ‘fear gap’ up in line with a resumption of the market rally. So the bottom line is we may end the week inconclusively and carry the whole process into next week, based on pre-market indications at least.