...Or does it?
After its meteoric Black Friday plunge, the SPX gapped up on today's open, rallied a bit and has been basing for a couple of hours (as at 2:15 pm).
The catalyst for this purge was news of the new Omicron COVID-19 variant from the southern African countries.
This two-day SPX price action is shown on the following daily chart.
Friday's close landed on the lower moving average (21 MA offset into the future) of the William's Alligator formation. The upper moving average (8 MA offset into the future) has crossed below the middle one (13 MA offset into the future), hinting of further weakness and rising volatility. The Balance of Power indicator failed to make a new high on the last two SPX swing highs, warning of weakening buying.
Watch for the 8 MA to cross below the 21 MA to signal a further pullback may be forthcoming. A cross of the 13 MA below the 21 MA could very signal a larger correction is imminent...particularly if the price drops and holds below 4600.
The RSI indicator on the following SPX:VIX daily ratio chart failed to make a new swing high when the ratio made its last swing high on November 2, and continued to decline, hinting of weakness ahead for the SPX. Similarly, neither the MACD nor the PMO indicators made new swing highs, and they crossed over into bear territory shortly thereafter.
A drop and hold below 200 could see ratio price retest 150, or even 100, or lower, depending on the velocity of a further pullback on the SPX.
In this regard, keep an eye on the Rate of Change indicator on the SPX (I've shown it with an input value of 1 period)...inasmuch as a drop and hold below the zero level will indicate increasing velocity to the downside and to what degree each day.
So, with the discovery of yet another variant, can anyone blame the scepticism displayed in the second tweet...especially when a prior tweet contains information that may be erroneous and premature? Both tweets were posted early Friday.
Trade with caution, inasmuch as the markets are prone to over and under-react to news, especially regarding COVID-19.
* UPDATE November 30...
Another day...another turnaround in markets to the downside...thanks to more public speculation on the latest COVID variant and Fed Chair Jerome Powell's remarks this morning while testifying before the Senate Banking Committee regarding "transitory" inflation..."time to retire that word."
His subsequent remarks regarding "wrapping up the taper of our asset purchases...sooner" added fuel to the fire.
At 12:10 pm ET, the SPX broke below Friday's low and hit a low of 4565...we'll see where it closes today.
Volatility is rising and is fraught with large-scale whipsaw action...expect this to continue for the near future.
The next Fed meeting is December 15...we'll see what happens.
* UPDATE December 1...
Another day...another (very big) plunge...
If the SPX:VIX ratio remains below 150, watch for this SPX pullback to continue...especially since all MAs have now formed a bearish crossover on the William's Alligator.