E SPX Caught Between Support And Resistance

VIX challenged both Short-term and Intermediate-term resistance before closing beneath them. A rally above Long-term resistance at 12.68 implies that VIX may challenge its Ending Diagonal at 17.50 in the next move.  

(Investopedia)  Investors on Wall Street have proven to be ingenious in finding new vehicles and avenues to take risks in the quest of making a profit.

One glaring example is the VIX, the benchmark volatility index used as a measure of market risk, which was invented 24 years ago to signal possible market crashes in the making. But since then, the index has morphed into its own market, a "giant casino" that speculators use to seek big money, shorting the VIX on bets that it will go even lower, the Wall Street Journal reports. In addition, volatility-control investment funds valued at about $200 billion use the VIX as a signal to buy or sell stocks, pension funds are placing bets on its movement, and insurance companies are linking products to it, the Journal says.

SPX caught between support and resistance

After last week’s key reversal SPX has been testing its Cycle Top Support at 2430.00 and its Diagonal trendline at 2445.00. This has left an inside week of consolidation and uncertainty among investors. This has been option expiration week, which is normally positive.   

(ZeroHedge) ] For confirmation that the market is now in its "blow off top" phase, contrary to claims that the market keeps "climbing a wall of worry" and that the "money on the sidelines" refuses to enter, look no further than the latest BofA "flow show" in which Michael Hartnett reports that capital markets just saw their biggest week of equity inflows since the US election ($24.6bn), another chunky inflow to bonds ($9.0bn), which combines to "the second largest week of inflows to Wall Street ever (largest was $35.5bn in Dec'2014)."

Unfortunately for active managers, the news was anything but good because for another week in a row, the big winner was ETFs with $26.3bn equity ETF inflow vs $1.7bn outflow from equity mutual funds, while fixed income saw 4.8bn bond ETF inflows vs $4.2bn into bond mutual funds; seven equity ETFs (SPY, IVV, IWM, VO, VTI, XLF, VUG) & one bond ETF (EMB) had inflows >$1bn.

NDX has a second negative week

NDX tested its trendline near 5600.00 and bounced, closing at its weekly Short-term support. The next move to look for is a challenge of the trendline and supports beneath it.  A decline beneath the Cycle Top support at 5580.58 may suggest a deeper correction is in order. Has the NASDAQ been defanged?

(ZeroHedge)  FANG Stocks just took out Friday/Monday's crash lows to the lowest since April 28th as NFLX leads the collapse.

The no-brainer is down 12% from its record highs last week, officially entering correction.

(RealInvestmentAdvice)  No! I am not talking about President Trump but rather the crash in both Technology stocks, and Oil prices, which are obstructing the continuation of the “bull market.” 

As I discussed this past Tuesday, the mini “flash crash” in Technology certainly woke investors up.

“While there is certainly damage being wrought in the Technology and Discretionary sectors, the rotation to Financials, Energy, Small and Mid-Capitalization areas are offsetting the correctionary process. As shown below, the markets remain confined to the bullish trend currently while the overbought condition is being reduced.”

 High Yield Bond Index rallies above Intermediate-term resistance

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