Stock Market Technical Analysis Blog
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In the market today we had a huge gap up in stocks because of Summer's withdrawing his name from the new Fed chief race. If he had been appointed it was widely believed that he would have been toxic for stocks because of his more hawkish stance on the speed of tapering. Considering the tremendous load this news removed from the stock market, the VIX should have cratered downward inversely of the S&P's monster move up. Instead, the VIX closed in the 14.40 area where it spent most of the afternoon Friday. The VIX's failure to move lower in proportion to the S&P move up is a warning sign that the S&P is a little too frothy at today's closing level.
While they could still, of course, come in and juice the overnight futures higher I decided to go ahead and close the SMV Model Portfolio SPY trade, with an 11:53am tweet today, for a 3% gain from Friday 8/6. I marked this exit with a red dash above today's bar in the top right corner chart. Also, another concern for the market is that in the lower left corner chart above, the VIX was at the sentiment EMAs red/green line juncture Friday and after today's monster move up in the S&P and removal of a huge market burden of a possible more hawkish new Fed chief, the red line still did not cross down thru the green which is really what the boys were hoping to happen with the perfect timing of Summer's announcement. We are now still in the situation where the red line could bounce up from the green, triggering a second leg down in the correction.
The name of the game is to take the easy money and let the daredevils play at the frothy elevations. If the market doesn't pull back here it at least needs to go sideways for 2-3 days before I would consider re-entry.
The name of the game is to take the easy money and let the daredevils play at the frothy elevations. If the market doesn't pull back here it at least needs to go sideways for 2-3 days before I would consider re-entry.
Trade well my friends
Alan
