The markets peaked last Tuesday, with the Dow Industrials printing a high not seen since 2007, but none of the other indexes that matter followed the Dow's lead, and markets tumble lower ever since. Commodities, copper and semiconductors created the market negativity and the downside kicked in strongly yesterday after the financials puked and volatility spiked higher. The weak commodities and copper indicate that the economy is now in disinflation and headed for deflation, Chairman Bernanke's number one worry.
The SPX fell thru the support at 1394 on Thursday, support that was holding for a few days. On Friday, price collapsed thru the 10, 20 and 50-day moving averages. Much of the price action Friday played around the 1370.58 level so watch that closely next week. Isn't it interesting that this level was important, almost exactly one year ago, when it placed the top for the markets in 2011?
For the SPX on Monday, starting at 1369.10, the France and Greece election results will move markets. The market bears only need one measley point lower to print under 1368 and the markets will accelerate lower. Price will likely test 1364 in short order and then move lower to 1361. The market bulls must retrace Friday's move to reginite the bull party, which is unlikely, so the bulls will simply try to stop the bleeding and downward momo. A move thru 1369-1390 is sideways action. Thus, watch the Sunday evening futures as the France election results occur, any hint of red will signal a further bearish move lower for markets when the Monday bell rings.
The SPX has dropped from the Tuesday high at 1415 to 1369 in 3 1/2 days, -3.3%. Price will likely move back up to back kiss one or more of the MA's, so watch the 20-day MA at 1383 closely. The back kiss will result in either the bulls regaining control by moving back above 1383, or, the back kiss will be successful for bears resulting in collapse and much lower numbers ahead.
· 1425 (Gap Fill from 2008)
· 1424
· 1422 (4/2/12 Intraday HOD for 2012: 1422.38)
· 1419 (4/2/12 Closing High for 2012: 1419.04)
· 1417
· 1415 (5/1/12 1415.32)
· 1413
· 1410
· 1408
· 1406 (5/29/08 HOD)
· 1404
· 1403
· 1402
· 1399
· 1398
· 1394
· Friday HOD 1391.51
· 1391
· 10-day MA 1389.97
· 1389
· 1388
· 50-day MA 1386.64
· 1385
· 20-day MA 1383.40
· 1378
· 1375
· 1372
· 1371(5/2/11 Intraday HOD for 2011: 1370.58)
· 1370
· Friday Close 1369.10
· Friday LOD 1367.96
· 1366
· 1364 (4/29/11 Closing High for 2011: 1363.61)
· 1363
· 1361
· 1359
· 1358
· 1356
· 1351
· 20-week MA 1350.28
· 1347
· 1345
· 1344
· 1343
· 100-day MA 1342.77
· 1341
· 1339
Lots to watch. $BPSPX slipped under 70-percent. $CPC getting closer tp 1.10. SPX:VIX now 71-plus. Hard to know when to start bringing on longs. Where will we settle? Lower Keltner at 1357, for those that follow that. We'll find out from the Sunday night futures, but given the Greek chaos, we could easily fall into the 1330s? Wasn't that your initial target on the monthly SPX chart? Please let us know when you might start sneaking in an index long ETF.
ReplyDeleteHello Weaver, you are on top of things. Watch the SPX:VIX closely, it should drop under 68 at the opening bell and the key is to see if it stays under 68 all day long, that means continued downside, a move back above 68 will signal the bulls are recovering.
ReplyDeleteWatch XLF 15.18 (price is now below and market bearish), VIX 18.14 (price is above market bearish) and RTH 41.35 (price is above and market bullish). The interplay of these three will provide vital info on broad market direction for Monday and going forward.
Watch out for a sharp spike upwards like July's behavior, this would suck the bulls back in and discourage bears, then another hard revese back down which would be the big drop, punishing all the bulls that jump back in and then the bears watch from the sidelines since they got discouraged when the spike up occurs. The other outcome is simply falling down the rabbit hole in the days and weeks ahead. Thus, we will just take it hour to hour and see how it goes.