Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, May 16, 2012

5/16/12 Gapped and Lost It

Stock Market Technical Analysis

Click on above image to enlarge

At the day's open the stock market gapped up modestly bouncing from the S&P's closing on its 150 EMA yesterday.  Shortly though, the selldown continued as two things happened in the charts that are shown above. 
 
 
In the top chart, the VXX (VIX Futures) crossed above the pink 50 Day EMA line and the UUP (Dollar Index) shown in the bottom chart rose up into its great bear channel shown with brown lines which is not a friendly place for the stock market.  If you look closely you can see that the UUP broke out of the horizontal pink line channel in the past two days also. 


We are clearly in bear territory now and the market sensitivity to the worsening euro situation is likely to increase as the days go by.  To make things worse, the PPT's attempt to cap the VIX run at its 50 week EMA line was breached this afternoon and the VIX closed above it.  The most glaring thing missing from the big picture here is the PPT not gapping the market up huge every few days even though it would likely come right back down as they did continuously last summer.  If we don't have a big gap up soon, no matter how cheesy or ridiculous the cut and paste reason is for it, trading programs could start to accelerate on the sell side.  They need to gap the market up at least 1% one morning and paste anything on it to break the downside momentum before it gets carried away. 

Alan