What’s funny is that if you look at my post from last weekend you’ll see that I was certainly expecting market doom for the week that just past. And then we get a 7.39% rally in the $SPX.
Meanwhile, in another part of town, all the breadth indicators that I follow are giving neutral readings as of Friday’s close, so no help there. I am watching the daily chart of $NYSI (you can bookmark that chart, BTW) because it seems to me that $NYSI should be a little further along, given last week’s mega rally. If you look at the early October period on that chart, you’ll notice that $NYSI got right in the game and quickly turned and then moved up through the MA’s. Not so this time and until the Summation Index truly turns and begins to move above the MA’s then this is a cautionary sign and this needs to be watched in the week ahead.
This following chart is of XIV, which is the inverse of the $VIX. I’ve put this up because if XIV is a ‘buy,’ then the $VIX is a sell and the $SPX should be a ‘buy’ or a ‘hold,’ or so they say. On the chart I’m using the 9/20 method and per that method ‘buy’ and ‘sell’ signals are generated when the 9EMA crosses up through or down through the 20MA. The 9EMA has just crossed up through the 20MA. For the $VIX, the 9EMA crossed down through the 20MA this past Wednesday. And the $VIX is also sitting right above its 200MA, which is at 25.24.
The idea is that with the $VIX in the 20’s and in ‘sell’ mode per the 9/20 method and just a hare’s breath away from closing below its 200MA, then longs should be in the driver’s seat, except that in this market you just can not ever take anything for granted and you can not ever take you eye off the ball. So watch these two, XIV and the $VIX, next week and see how they do in relation to this setup.
For the $SPX, the main concern for Monday and maybe Tuesday, is how the $SPX deals with that shooting star doji on the daily charts. If that doji had appeared on a Monday, then by Tuesday you’d have a few more clues as to how things might play out, but since it appeared on a Friday, then we’ve got the whole weekend to worry about it. And, believe me, I’m worried about it. If there is a negative reaction to that doji, then it’s going to be important for the $SPX to stay above the important voodoo psycho level of 1200 on any pull back. If there is a pull back, and as long as 1200 holds, then we should be good to go, IMHO, of course.
For the weekly chart, there’s no question that last week’s action has turned most of the MA’s and indicators. A couple of things I’ll be watching with interest in the week ahead is the 50MA on the daily chart, which is just about where the 52MA is on the weekly chart. I’m also going to be watching Wilder’s ADX for a Bullish X, which almost happened in late October and is very close to happening now.
IMHO, this is not a bullish looking chart, though it isn’t bearish, either. For the weekly chart to start looking bullish, the $SPX is going to have to get back above 1277 in the week ahead, which would also break it out of the symmetrical triangle that seems to be constraining it in the daily time frame. Until the $SPX can decisively break out of the symmetrical triangle pattern and clear 1277, then it is at risk of a pull back to the 1200 level, which is about where the bottom line of that symmetrical triangle pattern on the daily chart will be in a few days.
Do you ever wonder if you’re paranoid enough?
GL in the week ahead.