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Monday, October 14, 2013

Daily update 10/14

It did it again.  What happens now?  Here is the daily SPX chart.

Yesterday I noted that the other two times SPX crossed 1700 it went up the next day.  However, it then topped out.  We were up today just like before.  Will tomorrow be different this time?  SPX came up just a tad short of the .786 retrace level.  This is the first time we got over 1700 while the 18 SMA is still falling.  If we close back below that MA while it is still falling it would be a pretty bearish sign.  Lets take a look at the VIX chart.

The VIX divergence is still persisting.  This is by far the highest level it has been at while SPX was above 1700.  It was even slightly positive today with SPX up.  The 50 SMA has crossed above the 200 SMA for a second time this year.  This is the first time we had two crosses in the same year in this bull market.  There was no cross above last year at all.  The last one before this set was in 2011.  I don't know if this is a sign that volatility is going to pick up for sure or not.  However, I do know that down side risk is increased when in this condition.   Should the market turn down, the VIX is in position to spike higher then it has been since 2011.

The other times they got to squabbling in Washington the market sold off then rallied after the deal was made.  This time the market has not sold off obviously as we are very near the highs.  People figured they would make a deal at some point so they did not want to sell.  What happens once the deal is done?  We still have weak market internals and that persistent VIX divergence.  I have the feeling there might be a sell the news reaction.  Keep an eye out.

Chart practice has been updated with CME the stock tonight.


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