Bernanke Speaks, Market Pukes

Stock Market Technical Analysis Blog

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In the market today we escaped the QE tapering bullet but learned it may very well be the last time causing  a strong sell off  into the bell.

Taking a look tonight at the Sentiment EMAs on the Daily chart of the S&P,  we see where the smaller red ema was starting to down cross late Friday, but with the liberties taken on the opening of the S&P futures Sunday evening, the set up showed a bounce beginning on Monday.  After today's sell off we can see that the red-green line bounce is in trouble.

Looking back on the past 6 months we see that the Sentiment EMA line bounces are what have been used to keep the market going higher.  Note the early Jan, early March, and late April bounces.  The next two days are critical, if the red line down crosses the green it signals the transition of stock market sentiment from Bullish to Bearish.  If this happens, I am sure every obligatory bounce point will be utilized on the journey down and the 4 am manipulation will be heavy to try and slow the damage.  Nonetheless, when the red is below the green line the path of least resistance is definitely downward.

If they come in at 4 am tomorrow and work their magic, it could delay the resolvement of this key line interaction for a couple of days.

Trade well my friends,

Alan

SPY Pushed Above Resistance

Stock Market Technical Analysis Blog

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In the market today the SPY was driven above the resistance line that had been giving it trouble for the past three weeks and closed above it (right chart above).  This move in the SPY brought the VIX to close right down on its lower line of its extension channel (left chart above).  With Bernanke's speech tomorrow this move in the SPY will be a win win scenario to give his speech in.  If he can manage to say everything the market wants to hear and nothing that it doesn't, this move will be called an anticipatory run up to a speech that calmed the market.  If the market hears something it doesn't like and it triggers a sell off, the market already has a few days of air cushion below it to cushion the blow if the sell off becomes serious.

If Ben's speech calms the market then we are likely to see the VIX finally fall out of that steep ascension channel which is just what the bulls are looking for.

Trade well my friends

Alan

Intervention Monday - SPY & VIX

Stock Market Technical Analysis Blog

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Going into the bell Friday we had mutliple EMA pushdown situations set up to cause a downdraft in the market today but as we all know they just can't let that happen.  They decided to take liberties with the opening of the S&P Futures Sunday night by basically just spinning the dial higher to a pretty number and then starting the Futures trading on it.  The SPY continued the big gap up at 4:01AM with the high elevated opening then followed a big gap open at the regular session and a decent climb until midday.  

In the two charts above, the VIX on the left and SPY on the right, it is easy to see why all this happened.  They were making an attempt to break the SPY up above the two week red horizontal resistance line shown in the right chart above.  While we did get above it in the late morning, the  SPY couldn't hold and we dropped back below it once again.  The pressure is on them time-wise to make it happen before the VIX's red ascension channel forces it above its blue 432 EMA line shown in the left chart.  If they can just get the SPY above the two week resistance line and close above it, this will probably be enough to cause the VIX to drop out of the red ascension channel.  Today was a big effort but it wasn't enough.  Also, Bernanke's speech on Wednesday looks to be timed right as the VIX gets trapped at a point under the blue 432.  If they fail to break the SPY out by then, Bernanke will have to make the speech with the VIX forced into a powerful pivot point where any word he says might move it above the blue 432 or cause the VIX to drop out of its red ascension channel.  Buckle up...

Trade well my friends

Alan

The Bigger Picture

Stock Market Technical Analysis Blog

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Tonight I just wanted to step back a little and take a longer term look at the channels on the S&P and the VIX shown in the two charts above.

Trade well my friends

Alan

VIX Focus

Stock Market Technical Analysis Blog

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Taking a closer look at the situation on the VIX, I've applied the brown upper and lower primary channel lines showing its upper lines ceiling effect on the VIX.  I also applied the ascension channel in red lines showing how it is trying to carry the VIX up to trading above the blue 432 line which causes market havoc when it trades above it.  Until the VIX falls out of this red ascension channel the market will be really nervous as that channel is trying to take us where we don't want to go.  

Alan

SPY & NASDAQ Triangles

Stock Market Technical Analysis Blog

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In the market today, we lost part of yesterday's gains as the VIX reversed again and went back up to the underside of the blue 432 line.  One thing that is quite noticeable is that the past two weeks trading has been spent building large symmetric triangles on both the SPY and NASDAQ.  The market may get more volatile as these triangles near a point and breakout in either direction.  

Trade well my friends

Alan

SPY Channel Saved

Stock Market Technical Analysis Blog

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During the first hour today they did indeed step in to rescue the teetering SPY channel.  Not too far into the first hour they broke the SPY out of yesterday's downhill channel and started a new intraday uphill channel.  This caused the VIX (in the bottom chart) to pull back down below the blue 432 EMA line and as soon as it did the rally was on.  Anyone who was ready and watching for that VIX to cross back down below the 432 could have bought the SPY June 163 weekly Calls in the .35 range and held tight thru the day with the help of the narrow channel they were trading it in and then sold before the bell in the 1.40 range for a monster 300 percent gain.  

Trade well my friends

Alan