We are looking at a split market with several sectors, like $COMPQ, $NDX, $TRAN, RTH, and a few others doing quite well, but with other key sectors lagging and/or not participating. Several of the leaders from the rally that began in September of 2010 fall in the group that is lagging. For instance, IYR, $CYC, $SOX, $XAL, and IWM were part of the vanguard that led the charge out of the summer 2010 lows but are now lagging behind.
Another example of this split market can be seen in the differences in the Bullish %’s of the $SPX and the $NYA. $BPSPX closed at 63% on Friday while the $BPNYA closed at 46%. The difference between these two is probably due to issues within commodity sectors which certainly raises a red flag. However, as long as we continue to see higher highs and higher lows in the $INDU, $COMPQ, and $SPX then the lagging sectors will eventually get in the game, or famous last words.
$VIX managed to get back into the 30’s this week and closed at 31.32. Using the 9/20 method, $VIX has been a ‘sell’ for about two weeks and the 20MA is just a hare’s breath away from crossing down through the 50MA. Still, if volatility is going to back off for more than just a day here and there, then the $VIX is going to have to get back into the 20’s and push toward the lower 20’s over the course of the next couple of weeks.
The charts below of the $SPX continue to show improvement and suggest further improvement.
60min chart showing an up trend that began on the 10th which is just the most recent leg of the up trend that began on October 4th.
Daily chart showing steep trend line. $SPX can break down through the bottom of the channel but has plenty of room below before it would trigger a ‘sell’ signal, which would/could come with a decisive close below the 50MA, IMHO.
$SPX did close above the 1230.71 swing high from August 31st and the 250EMA at 1230.18. And this was done on good money flow and with On Balance Volume looking good and in a nice up trend.
Chart courtesy of StockCharts.com
Weekly chart of $SPX showing potential price channel and potential resistance at the top of the channel in the 1250 area. For reasons I’m not sure of and except for price, the indicators on this chart have not been updated. The stochastic is now at 47 and there has been a bullish MACD X. Also, the 13 and 26 MA’s continue to move down, but the 52MA did move from 12163.31 last week to 1264.37 this week.
With $SPX already above the 13MA, it would be very bullish for the $SPX to rise above and close above either one or both of the MA’s sitting above it. That would be 1252.42 for a close above the 26MA and 1264.37 on the 52MA.
The market continues to be news driven and who knows what’s going to come out of Europe this weekend which might propel the markets higher or send them deep into the abyss. I think it’s naive to think that the European Union is going to let the debt crisis get the best of them and so I expect some kind of positive resolution. And, of course, I could be completely wrong.
What I’ll be looking for next week, which I didn’t get last week, is a bullish X of the ADX line up through the falling -DI line. This is very close to happening on RTH but other sectors will need several good days, maybe the whole week, before this gets close to happening. If it even happens at all.
GL in the week ahead.