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Tuesday, October 23, 2012

Monthly/Weekly/Daily Cycles on Major Indices

Looking at a top-down view of the 6 Major Indices, I would note the following.

Monthly View
  • all just below the top of their recent highs
  • Stochastics indicator is in overbought territory, except for DJT & DJU which is neutral
  • major support is at the bottom Bollinger Band, which, generally, lies in the vicinity of the Monthly 50 sma (red)
  • while the 50 sma is still (just) above the 200 sma on the SPX, it has recently crossed below on the ES, so it's now officially under the bearish influences of a "Death Cross" formation on the Monthly timeframe

Weekly View
  • all at/near their mid-Bollinger Band
  • Stochastics indicator is not yet in oversold territory on 5 of the Indices...NDX is now oversold
  • major support sits around the vicinity of the Weekly 50 sma (red)

Daily View
  • DJI, SPX, NDX & RUT are at/below their lower Bollinger Band
  • DJT is in between its upper and mid-Bollinger Band
  • DJU is just below its mid-Bollinger Band
  • Stochastics indicator is in oversold territory on DJI, SPX, NDX & RUT
  • DJT & DJU are neither overbought nor oversold
  • major support sits at the Monthly 200 sma (pink

In the short term, we may see a bit of a bounce, but medium and longer term, these Indices may continue their downward trek to alleviate their overbought conditions on their Weekly and Monthly timeframes.

The following ratio charts comparing the SPX, the RUT, and the NDX to their respective Volatility Indices show that, while a lower swing low has now been made and the Momentum Indicator (MOM) is below the zero level, each one is sitting at or just above a support level on the Daily timeframe. Increasing volatility will confirm any further selling in these 3 Indices. Of particular interest is the fact that MOM has made a lower swing low on the SPX:VIX to confirm the lower low on price, whereas it has not on the RUT:RVX and NDX:VXN...suggesting that today's (Tuesday's) selling momentum on the SPX accelerated at a greater pace than on the RUT & NDX...ones to watch during any further pullback to confirm an acceleration of the selling momentum.