Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, May 18, 2011

Market Rally Materializes 5/18/11

Stock Market Technical Analysis
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The market rallied nicely today because the VIX failed to break up thru its brown upper channel line yesterday along with the SPY having a hammer reversal candle sitting on the lower line of its one week pink downhill channel. 

Also as I mentioned last night, as soon as the VIX crossed below its blue bull/bear line and down thru the lower line of its red uphill channel the market kicked in for a second wave up in the afternoon to finish with the S&P Index +12 and the Nasdaq +32. 

Looking toward tomorrow, the VIX looks free to fall lower and will if the SPY can successfully break out of the top line of its downhill pink channel where it closed at today.  The momentum looks strong enough to carry us thru but closing at the pink line leaves us vulnerable at the open, but the SPY must get free and clear of that pink downhill quickly to get the bear camp to flip and join the bulls for a multi day rally.  Tomorrow's open will be the bears moment to try and nip this rally in the bud.  If there is no bad economic news out in the premarket the bias should remain to the upside tomorrow.

Alan