The market bears needed to push under SPX 1310 today, which occurred, to usher in stronger market negativity. SPX now back testing the failure at 1310. Keystone's SPX:VIX ratio fell under 68 indicating that a large down day is on tap, triple digit down for the Dow Industrials, as long as the ratio stays under 68. The CRB is holding up fine so that is giving the bears trouble currently. Oil, copper, and commodities are lower, on the stronger dollar, as well as the euro lower, all of these helping the market bears.
Volatility jumped higher, perhaps last evening's chart will begin to take shape with the projections moving forward. Utes, UTIL, now have a 445 handle. Remember that the critical level for this week is UTIL 439. Should that level fail you will see blood in the broad indexes. Bulls can maintain their composure if they stay above UTIL 439.
Thus, the markets are trailing a bit lower as per the SPX daily and 30-minute charts posted this morning. The SPX:VIX under 68, and SPX under 1310 helps the bear case. The CRB remaining above 310.40 and UTIL above 439, however, helps the market bulls. These two buddies will limit any downside market move. Should one of them fail, the bears will push strongly lower. Keep an eye on the SPX:VIX ratio, now printing 66.67, remaining under 68 favoring market bears, albeit slightly.
Note Added 1/24/12 at 10:57 AM: The SPX is floating upwards into the 1312 handle but the SPX:VIX ratio remains under 68 so the bears remain in control today. The SPX is down -0.32% while the Nasdaq is down only -0.01%. Since the Nasdaq is not leading the down side the market move south does not have much steam behind it, this allowed the SPX to float upwards. The bears need the SPX to break the 1310 level again to increase negativity. Markets should weaken as long as the SPX:VIX ratio is under 68. The SPX:VIX is now printing 67.17, the market bulls are trying to fight back and need to regain the 68 level.
Note Added 1/24/12 at 11:03 AM: The SPX 1310 represents today's support and the neckline of the H&S pattern shown on the previous 30-minute chart. If the SPX:VIX ratio can stay under 68, and the SPX comes back down to lose the 1310 neck line again, she should flush south in short order thereafter.
Note Added 1/24/12 at 11:13 AM: The SPX:VIX is coming up to test the underside of 68, this is for all the marbles today, either failure now to favor the bears and accelerate the selling, or, the bulls punch up thru 68 turning today's weeakness into a non-event. SPX:VIX now printing 67.72........which side wins? The CRB rocket ride north over the last hour is providing the bull push.
Note Added 1/24/12 at 12:17 PM: The SPX:VIX continues its back kiss of the 68 rupture this morning moving sideways for the last hour, favoring bears staying a sliver under 68. As the ratio goes so goes the broad markets today. The fight for 68 continues.
Note Added 1/24/12 at 12:17 PM: The 8 MA fell thru the 34 MA for the SPX 30-minute chart, reference this chart previously posted for the analysis. This is a feather in the bears cap. The bulls, however, continue to create loft in the markets with the elevated CRB and also the Nasdaq which is not showing negative leadership. The drama continues. SPX:VIX printing 67.63......67.67.......67.72.......
Note Added 1/24/12 at 2:45 PM: The SPX:VIX ratio popped back above 68 at 2:14 PM, the bulls win again. This negates the large market sell off for today, unless the ratio falls back under 68. The CRB remains elevated. The Nasdaq is green while the SPX is red so obviously there is no downside leadership by technology, thus the bearish market move lower today faded away. The 8 MA remains under the 34 MA for the SPX 30-minute chart so this is a feather that stays in the bear hat. TRIN is 1.09 almost directly on the neutral 1.0 line favoring neither bulls or bears currently. See if the SPX:VIX can maintain above 68 into the close, or not.
Note Added 1/24/12 at 3:04 PM: The SPX:VIX is printing 68.22, now a smidge on the bull side and enough to stop a large market sell off. If the market bears push lower into the close today, it will start with the ratio losing 68 and then the SPX losing 1310. Otherwise, the bulls will float sideways to sideways up into the close.
Note Added 1/24/12 at 9:32 PM: The SPX floated up into the close. The SPX:VIX closed at 69.52 so the drama picks up on Wednesday right where it left off today. If the ratio stays above 68 the broad markets remain buoyant. If the ratio loses the point and one-half and drops under the 68, that will signal a large down day on tap.
Remaining under 68 favors bulls? I don't understand.
ReplyDeleteTypo corrected; you are correct, SPX:VIX under 68 favors the bears, above favors bulls.
ReplyDeletecan you tell me what is CRB?
ReplyDeleteReuters Commodities Index ($CRY0), which may have just hit a descending upper trendline. If the index stays below the trendline, will favor bears.
ReplyDeleteThank
ReplyDeleteYet another late-day save by the bulls developing? What are we to make of that? And could utes become a major issue as early as Wednesday?
ReplyDeleteThe CRB is the Commodities Index that tracks raw materials such as cocoa, coffee, beans, rubber, copper, cotton, zinc, sugar, oats, corn, grains, and wheat to name a few. The index provides a broad cross sectin for the commodites sector. Use the $CRB symbol in stockcharts to see the charts but use Bloomberg or ino.com for near real time quotes. The commodities, copper, oil, etc... move upwards on a weak dollar. The stronger commodities then add bull fuel to lift the broad markets.
ReplyDeleteThe sneaky stealth market rally lately is most likely due to the anticipated China triple R easing that should be announced at anytime. Any quantitative easing measures pump commodities higher since all these materials are needed to boost an energetic spurt in the economy due to the governmental money pumping.
CRB has been a focus the last few days since Keystone's algorithm identifies the key sector at any point in time that most impacts broad market direction, and CRB is in the hot seat now. With the CRB buoyancy displayed today, this is playing a major role in keeping the broad markets higher.
When China announces the triple R lowering confirming the easing step we will find out if it was priced into the markets, or not. Market bulls want to see a weaker dollar that boosts commodities, copper and equities markets. Bears want to see a stronger dollar which will equate to weaker commodities, oil, copper and equities markets. A potential relationship of a stronger dollar in concert with stronger markets may come back in vogue in the future but for now markets are ruled, and fueled, by quantitative easing and money printing. CRB was strong enough today to pull the SPX:VIX ratio above 68 but there is still an hour of trading remaining.
just wanted to say thanks... I follow your insight all day great job chuck
ReplyDeletehow do you know that prices will possible come back to test highs after a selloff (like today) based on weekly indicators (rsi?) chuck
ReplyDeleteDanke Chuck, it sounds like you are referencing this mornings charts where the SPX daily chart shows the negative divergence but the weekly chart does not. I am assuming you know what negative and positive divergence look like. Keystone considers it the most important tool in technical analysis. Study it closely and be able to recognize negative or positive divergence with a blink of your eye, you will immediately become a better trader.
ReplyDeleteWhen price moves higher, look from price high to price high, then compare that to the indicators below such as RSI, MACD, stochastics and money flow. If they are sloped down for the same period of time you have negative divergence that tells you a spank down of price is coming.
If you reference the weekly chart, oversold conditions and a rising wedge are shown, both bearish signals that are agreeable to price dropping, but note that the indicators are sloping up not down. If the weekly chat was weak, the indicators would be sloping down showing negative divergence, they are not. Therefore, the upward sloping lines for the indicators indicate that afer a pull back occurs, price wants to make another matching or higher high 'to satisfy the long and strong profile of those upward sloping lines for the indicators'.
What you will then find typically happens is that next matching high for the SPX will come with the negative divergence that signaling extended downside ahead. Another option is that price will not recover back upwards after a sell off, price will simply roll over and die.
Hope that helped.
i figured out what you meant last night. I cant tell you how much you helped me!!! forever greatful chuck callea
ReplyDelete