The market continues to be volatile, with $SPX bounding from support at 1990 to resistance at 2065 swiftly in the past four days. Outside of that range, there is further support at 1975 (the October lows) and resistance at 2090 (the all-time highs). As a result, the $SPX chart remains neutral at this time.
Tuesdays after three-day weekends often produce wide swings. Yesterday was no exception. A higher opening was almost immediately followed by severe selling – knocking $SPX down almost 25 points. But then the bulls found their buy buttons, and the market rallied back to finish slightly on the upside. The support at 1990 remains intact, and it is an important level. Resistance is at 2030 and 2065, the latter being the more important one.
The stock market has experienced huge moves so far this year far greater than have been seen since the fall of 2011. There has been a lot of back forth action, but the bears seem to be gradually getting the upper hand. Yet, the indicators are mixed and it could be that the Standard & Poors 500 Index ($SPX) is just in a wide and volatile trading range.
The market has been on a rather wild ride for over a month now. With the action of the last two days, our indicators have swung back to a bullish status, for the most part.
The fact that $SPX has now risen back above its 20-day moving average and has closed above 2060 is positive. A second day's close above 2060 would be confirmation of the recovery in the $SPX chart.
Equity-only put-call ratios have rolled over to buy signals.
Investing Editor of CNBC.com John Melloy recently wrote an article for CNBC Pro exploring popular stock market correction strategies. Ryan Brennan of McMillan Analysis Corp. was quoted in the article:
'To hedge an entire portfolio, we recommend the purchase of $VIX calls that are roughly 7.5 points out of the money,' said Ryan Brennan of McMillan Analysis Corp. in an email.
Stocks stumbled into year end, with a couple of down days, the second of which was downright nasty. But was this just illiquid, year-end manipulation (as the bulls suggest) or is it something more serious? It's a little early to tell at this point, but if things don't improve quickly, then the bears have a chance to engineer a correction.
The reversal off the December lows was sharp, powerful, and even record-setting. The chart of the Standard & Poors 500 Index ($SPX) has returned to a bullish status, now that new all-time intraday and closing highs have been registered.
In nearly 45 years of trading, I don't think I've ever seen a market as wild as the one has been this month. Let's review the entire technical picture. First of all, the chart of $SPX has not yet returned to a bullish state. $SPX would have to trade at new highs (above 2080) in order to turn the chart bullish again.
We have traditionally used the mBB system only with respect to the $SPX. It has worked well there, as we have had some very successful mBB signals this year: a buy signal in February, a sell signal in September, a buy signal in October, and now another sell signal recently. The only incorrect signal this year was a sell signal in June ($SPX eventually fell in late July, but no reasonable trader would have still been holding a short that was established in early June).
Various indicators have been turning bearish since mid- November. But until this week, $SPX itself had not broken down, and since price is "king," that was quite important. However, now $SPX has broken down, as it has fallen below support at 2050. This completes a bearish pattern, and a full-fledged correction is underway. This could be sharp and short-lived, and since it is taking place late in the calendar year (when seasonal bullishness occurs), that is probably the case.
