Bulls need to be very, very careful here because this market is moving like a bull that has spent way too much time gorging itself at the feeding trough.
Yes, it keeps moving higher and the trend is higher. But the trend is only your friend until it turns against you. And the way you normally determine when that is about to happen is to watch market momentum around resistance projections. And this is looking more and more like one of those situations where “friends” are about to have a disagreement.
The daily S&P chart is just looking pitiful. It’s in an uptrend, yes, and it should still make new highs, which it just missed making today by one tick. But as we write this the market is selling off a bit in Asia. It is possible that this may be a short term double top. The upward strength is certainly feeble enough that a further sell off would not be unexpected. But I still think most traders would want to see “closure” with a run to new highs up to resistance projections at 1983.25 to 1988.25 before a larger correction begins to the downside. But, as always, we have to be prepared for anything. A move below 1958.75 at this point would augur for a further decline, so we shall see.
Daily VIX is another interesting chart though. We confirmed the negative DQ signal from yesterday as a sell signal. But VIX still did not take out the last low at 10.28 and now daily DQ has turned positive again for today. Now a move above 12.47 would be very bullish for VIX and very bearish for the S&P, at least in the short term.
But if VIX should happen to move below 10.28 we will likely get even STRONGER indications that it is even more of a screaming buy at those levels. So we are the verge of living in very “interesting times”, in the Chinese curse sense of the word, indeed.
Intraday CIT trading went pretty well today until the latter part of the day when we got hit by 3 consecutive whipsaw losses. We still finished the day up +3.75 handles and you can see all our trades on the blog on our website. That now puts us up +55.25 handles for the month.
The bottom line here is while there is still likely some more backing and filling to come, and probably new highs, this is NOT a time to get complacent if you are a short term bull. This market is virtually screaming with signs of weakness.
So keep your eyes peeled and one foot out the door if you are long because “interesting times” are likely not that far off.