Yesterday was the type of day technicians dread, because literally nothing happened. What possible new insights could anyone have after a day like yesterday?
So I’ve decided we’re going to play a game called Quien Es Mas Macho? Sorry, bad SNL reference there. Actually it’s called What’s Bullish; What’s Bearish?
Let’s start off with what’s bullish.
First off, we have the SPX chart. This chart is still quite bullish intermediate-term.
The short-term SPX chart looks bullish as well, though I would expect a deeper retrace than we had. The retrace from the last couple days doesn’t look deep enough to be a 2nd wave, so I have relabeled the chart. If it was a 2nd wave, then bears are in real trouble. 2nd waves usually retrace 40-60% of the prior move.
Bears will immediately notice the alternate count, which allows for the possiblity that the rally off the 1340 print low will end very soon and constitute ALL OF wave (v). This is indeed possible, but generally one would expect more from a fifth wave at this degree.
Please note my annotation regarding the bullish trade trigger. I was anticipating a deeper retracement than the market gave us yesterday — and without that deeper retracement, I feel the potential for whipsaws around that trade trigger is markedly increased.
Also bullish is the fact that the Dow Industrials have closed the last 3 days above their 2011 highs. This is a key breakout level for the Industrials.
Now it’s time for what’s bearish.
First off, as I spoke about yesterday, the dollar looks bullish — which is generally bearish for equities. The dollar continues to maintain closes above its key trigger level.
I also did a short-term dollar chart last night, and the dollar has so far proved this chart quite accurate.
Another potential bearish factor is the VIX, which basically closed right on its lower Bollinger band yesterday. This often leads to a bounce in VIX, which is usually bearish for equities. Further, the VIX has reached a long-term horizontal support zone, which may also argue for a bounce soon.
So, it’s still a market of mixed messages. Unfortunately, the market gave us nothing to work with yesterday, so putting the possibilities all together on one chart looks very similar to yesterday’s.
In conclusion, the market didn’t give us much to work with on Monday. While the SPX charts don’t look at all bearish, the dollar seems like it may have plans to put the damper on things. Unless we have another day like yesterday, these questions should resolve soon. Trade safe.