When the world didn't end this morning because of the Greek elections, shorts started covering right at the open. This pushed SPX up to its 50 SMA, this is an area where the bears may show up again. That is where the indecision came in. Everybody was waiting for somebody else to make a move. Notice the volume was the lightest of the entire month so far. We are still above the blue up trend line so the market has a positive bias. We will have to wait and see if this 50 SMA turns out to be stiff resistance or not. Very light volume up moves can be wiped out very quickly if a selling catalyst happens. Headline risk still seems quite high to me even though people have been ignoring anything bad lately. The market can change its mind very fast so be careful.
The really odd chart today is the VIX.
The very sloppy inverse head and shoulders bottom pattern in SPX is a very clear H&S topping pattern on the VIX daily chart. I have no idea how reliable a pattern like this is on the VIX is. What is odd is the magnitude of the down day when SPX was up less then 2 points. Really big VIX down bars usually come right off a low after a spike up and are accompanied by a big move up in price. This far off the low and on a small up day I have no explanation for it. Given the overall macro environment it is a bit hard for me to believe that market volatility is going to contract like this chart suggests it could. This could be an extremely bullish sign for the market or one of those times when people look back and say how in the world could market participants have been so complacent. Only time will tell.
Bob
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