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On the first day after a historical breakout in the market, the vix and 20yr bond are both projecting concerns here. In the upper chart cluster, row 3, the 20yr bond climbed back into its black mother channel significantly today earning a #2 sell signal on the stock market. In row 2, the vix now has a triple bottom in place at the 21.00 level and poised to start upward earning a #1 sell signal on the market.
In the lower cluster, row 1 chart 1, today's pullback volume was considerable stronger than yesterday's breakout volume, a very bearish situation. In row 2 chart 3, the S&P tried twice to get back into the red steep bull channel from late spring / early summer and fell back out both times.
The most overriding concern today is the big volume on this pullback day and having only modest volume on yesterday's big technical breakout day. This implies there was major selling today and or new short positions in the market. The two volume bars should be reversed, big volume on the breakout day and small volume on the pullback day. This bearish volume situation is very likely what is causing some of the short term bond money players to move back over to bonds. The vix not dropping down below the 21 level (lower blue line of current channel) is very bearish also. Yesterday the S&P broke out of a 4 month sideways channel to the upside. The vix should have broken out of its channel to the downside an equal amount but it didn't happen, instead we put in the third bottom of a triple bottom at the 21 level which could easily be a springboard for a big jump in volatility here. This is somewhat disappointing in that a couple of weeks ago, the bailout team seemed to be getting serious about getting the market up but if they think an occasional short squeeze by itself is going to do the job, I have real concerns that they don't truely understand that this is a heavy market that will drop if they don't consistently keep pushing it and follow through consistently so that the masses of disgruntled investors will start to trust it and come back into the market.
By the way, today's S&P put /call ratio is 3.67, extremely bearish.
By the way, today's S&P put /call ratio is 3.67, extremely bearish.
Alan
