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Thursday, December 6, 2012

Daily update 12/6

One of these days the market will likely break out of the trading range.  Here is the daily SPX chart.

What we really have is competing reversal bars on 12/3 and 12/5.  Each one followed through a little bit the next day.  Which one is going to win in the end?  Until we break out of the range of those two bars what we have is a lot of noise and a pretty unpredictable intraday market.  Lets zoom in to the 195 minute SPY chart.

This chart looks like it is coiling between the 18 SMA and the 100 SMA (white line).  We can see the 100 was support back in Oct. then resistance in Nov. once it was broken.   These lines can't get much closer together so I think a decision is likely tomorrow.   I would think there should be a good move out of this pattern whichever way it breaks.  On this time frame the volume is showing big green bars dominant.  Lets look at the 60 minute chart.

On this time frame the volume is a little different.  There were some big green volume bars, but lately we have been getting some bigger red ones.  Since the 12/3 reversal day the pattern looks somewhat distributive.

Here is the daily VIX chart.

The daily VIX chart is poised to go up.  There is clearly a divergence between the VIX and SPX since 11/21.  This kind of divergence usually leads to a big short term move.  However, I have seen these divergences get resolved in favor of the VIX (down) sometimes and SPX (up) sometimes.  Sometimes the option players are right and sometimes they are wrong.

I think we are likely to get resolution on direction tomorrow.   I would think it would be down, but that could be my current bearish bias talking.  We have had a lot of rapid rotation from day to day in different sectors.  We have also had some wild intraday swings.  These things usually happen at important turning points.  Since we are near the highs, if this is indicating an important turning point, it must be down.  If we were down 20% from the highs it would look like bottoming action.  I think we will find out pretty soon.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.