Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, December 26, 2012

Indexes Lose Short Term Channels

Stock Market Technical Analysis Blog

click on image to enlarge

In the markets today we had another down day as the VIX continues to climb higher as market participants really don't like the way the fiscal cliff situation is unfolding.

In the first chart cluster, we see that the VIX gapped all the way above the stock unfriendly blue channel last Friday morning after the Boehner fiasco and with today's close it established the long term black line channel as being active again which could easily take the VIX up above 20.

In the second chart cluster, I've posted the long term charts of the SPY and AAPL.  Notice that the SPY slipped out of its 18-month blue uphill channel.

In the third chart cluster, the Weekly charts of the indexes with the Sentiment EMAs applied, we see that the Nasdaq and DOW have flatlined their two EMAs where it would not take much downward movement to have the smaller red EMA show below the green and trigger sell programs.  The most notable chart in that cluster is the VIX because it is starting to have an upcross which hasn't happened in about a year and a half and would also trigger big sell programs.

In the fourth chart cluster, top row, we see that the big triangle in the VIX I discussed about a week ago has broken out and heading toward the 22 level.  In the center chart of the top row, we see that AAPL continues to sag after having tested and failed at the underside of its gold Day 324 EMA line last week.  In the top row, third chart, we see that AAPL is almost down to its Day 432 EMA safety net blue line.  Also, AAPL is showing a bearish descending wedge pattern now.  In the center row, we see the Nasdaq, S&P, and DOW have all dropped out of their short term channels, but the XLF financials is still hanging on to its lower channel line while AAPL keeps trying but is still failing to break out of its downhill channel.  In the bottom row, the VIX does have an inner channel showing resistance where it is at right now which could possibly reverse it or we may have to go on up to the 22 level shown in the top left corner chart.  In the center chart bottom row, the VXX (VIX Futures) are running higher fast after being contained for five weeks in a small channel.  In the right final chart, the UUP (Dollar Index) is just a few pennies from breaking up out of its steep 6-week downhill channel which if it happens would cause havoc on stocks.

Putting it all together, the stock market is in a precarious situation right now.  It will be day by day for a while.


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