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Tuesday, August 15, 2017

Volatility Ramping Up in 2017

* See UPDATES below...

Further to my post of August 10th, the following Daily chart of the VIX shows that the same number of volatility price spikes has already occurred, so far this year, as made in all of last year.

A series of higher swing highs on the RSI, since Q4 of 2015, is hinting that each price spike made, since then, was done so with greater strength. We're seeing rising wedges form on the MACD and PMO indicators, suggesting that we may see the next price spike break out to new highs this year, with much higher force behind it, sending equity prices on the SPX plunging.

Call me cynical, but it seems to me that the escalating confrontational political rhetoric coming from the White House and Washington, of late, and the ensuing fallout playing out right before our eyes, indicates a fraying, or even an unraveling, of the current administration and its agenda...and, this is being reflected in this chart. So, as I said in the above article, buckle up!


* UPDATE August 17 @ 1:00 pm ET:

And, so the fractures in the White House agenda begin, with respect to tax cuts and tax reform...

After many major business CEOs resigned from his Manufacturing Council and were about to resign from his Strategy and Policy Forum in a show of non-confidence, President Trump ended both of these advisory groups yesterday...


Following this and a variety of criticisms from members of Congress of the President's responses to the violence in Charlottesville, Virginia on Saturday (including one Republican Senator, thus far, questioning his competence), all U.S. Major Market Indices are not reacting favourably today...this development follows the recent failure of Congress to pass some kind of promised healthcare reform.


Watch for any break and hold below their respective consolidation zones as a sign of non-conviction by investors in the equity markets.


The VIX is spiking up, once again...


And, the SPX:VIX ratio has, again, plunged below the 200 level -- a critical support level that I mentioned here -- which could precede a panic selloff in equities, especially if it drops and holds below 150, as outlined here.


* UPDATE @ 4:00 pm ET

The Major Indices continued today's epic drop to close on their lows of the day...as you can see, several of them have now broken below their recent consolidation zone.

As I mentioned earlier today, watch how the VIX:SPX ratio reacts tomorrow (and into next week), as a drop and hold below 150 would confirm that further weakness and higher volatility are in in store for equities.


And...the political turmoil continues...


Meanwhile, several Democratic lawmakers are posing some extreme suggestions...




Is there any mature leadership (within both the Republican and Democrat parties) that is capable of engaging in respectful dialogue to provide rational solutions to age-old volatile race-relations?

I sincerely hope this is not a rhetorical question...

It is, however, up to the President to lead by example.

And, since so many media pundits seem to have an opinion on this subject, I'd challenge them to participate in a concerted effort to heal this divide.

Your country is only as successful to the extent that you actively make it so.

* UPDATE August 18:

I doubt whether this new censure action by some members of Congress will prompt or contribute to such healing...






However, today's new development from the White House may be the first constructive step to be taken by the President to tamp down the chaos and mixed messages emanating from this administration since the inauguration.

Hopefully, the President will, finally, make a serious effort to get back (and stay) on track, and begin, in earnest, to, firstly, craft cohesive policies, and then, with the help of Congress, advance an agenda that will be beneficial for all Americans.

The results will, forever, be recorded in history...what would you have historians write, Mr. President?


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* ONE FINAL NOTE RE: THE MARKETS...

As a final note to this post, I would just mention that, as of Friday's close, the SPX:VIX Ratio managed to stay above the critical 150 Bull/Bear Line-in-the-Sand major support level, but remains well below the 200 New Bull Market resistance level...as shown on the following Daily and Monthly ratio charts.

Next week, we could very well see a re-test of the 200 level (which happens to intersect with the 200-day moving average), in anticipation of any favourable news from global Central Bankers, policy makers, economists and academics attending the upcoming annual Jackson Hole Economic Policy Symposium (August 24, 25 & 26), before traders make a final commitment, one way or the other, as to longer-term direction...Fed Chair, Janet Yellen is scheduled to speak on August 25 at 10:00 am ET and ECB President, Mario Draghi is also expected to speak at some point.

For further details on what to watch for on a variety of timeframes, I'd direct your attention to my recent post on this ratio here.