SPX: What A Difference A Day Makes...

...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.

Link to CBC tweet

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.

Source: ZeroHedge

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.

U.S. Markets In One Word: Indecision

And, unlikely to resolve before the November 3rd Presidential election. Until then, 3350 is a key support/resistance level to monitor. Chaos and higher volatility lie below that price within the jaws of the "alligator."

SPX weekly

SPX: Alligator's Jaw Shuts...Higher Prices Ahead?

Further to my post of June 29, the jaw of the William's Alligator has shut and two of the three moving averages (each offset into the future) have re-crossed and turned up, as shown on the following SPX daily chart.

As well, the Awesome Oscillator has flipped above the zero level.

Both of these are hinting that further buying may be in store...I'd need to see the third moving average turn up to confirm potential strength.

However, the Balance of Power is still with the sellers, albeit somewhat tepid, so, unless we see this flip to the buyers on this timeframe, we may be in for a bit more weakness before we see sustained buying resume.

Near-term support sits around 3070. If that's crossed, look for price to, potentially, re-test 3000, or lower.

Price on the following SPX:VIX ratio chart has broken back above 100 and the 50-day moving average, once again.

The RSI has crossed above the 50 level, the MACD has formed a bullish crossover, and the PMO is poised to cross to the upside.

We may see serious buyers step in on the SPX if:

• price can remain above 3070
• the AO remains above zero
• the BOP flips from sellers to buyers
• the RSI can hold above 50 on the SPX:VIX ratio
• the MACD can hold its bullish crossover on the SPX:VIX ratio
• the PMO forms a bullish crossover on the SPX:VIX ratio

Otherwise, we may see some minor selling on the SPX down to the 3000 level, or even a stronger effort to push it much lower toward 2800.

DANGER: Alligator Crossing on the S&P 500 E-mini Futures Index

Further to my post of June 21 with respect to the SPX, I'd just mention that the three moving averages (each offset into the future) forming the Williams Alligator on its counterpart S&P 500 E-mini Futures Index (ES) have all crossed to the downside, as shown on the following daily chart.

As well, the Awesome Oscillator has just turned negative in Sunday's overnight trading.

Both of these are signalling potential further weakness ahead.

Price on the following SPX:VIX ratio chart has slipped below 100, once again.

It needs to retake and hold above 100, the RSI needs to rise and hold above 50, and MACD and PMO bullish crossovers need to reform to signal potential sustainable SPX strength.

So, keep an eye on whether these ratio parameters can manifest, together with a rally and hold of the ES above 3075, plus a reversal and uncrossing of the Alligator moving averages to the upside, along with a reversal and hold of the AO above the zero level.

Otherwise, we may see more SPX selling to retest its June low of 2965.66, or lower.

SPX Targets

Further to my post of June 15, the SPX pushed above 3080.20 to reach a high of 3155.53 on Friday, as shown on the daily chart below.

I've shown two Fibonacci Extensions (one taken from the March low and the other taken from the June low), as well as an Andrew's Pitchfork (taken from the March low), and a Williams Alligator (formed by three moving averages, each offset into the future).

There are two areas of price confluence zones (targets) above the current price. The first is a minor confluence zone around the 3250 level (where two of the Fib Extension levels converge). The second is a major confluence zone around 3350 (where two of the Fib Extension levels converge with the bottom of the Andrew's Pitchfork channel).

The SPX closed on Friday just above the upper-most moving average of the Alligator. As well, all three moving averages are either curled upwards or in the process of doing so, hinting of higher prices ahead. I'd like to see the momentum indicator reverse its negative reading and push through and hold above the zero level to confirm any rally higher to either of these price targets in the short term. 

Otherwise, we may see the SPX retest its June low of 2965.66, or lower.

SPX: In The Jaws Of The Alligator

As of today's close, the S&P 500 Index (SPX) is currently in the 'jaws of the alligator' -- Williams Alligator, to be precise, which is formed by three moving averages, each offset into the future -- as shown on the following daily chart.

All three moving averages are curling down and the upper one has just crossed below the middle one...hinting of further weakness ahead.  Today's low touched the lower MA, which roughly converges with the 23.6% Fibonacci retracement level. A break and hold below today's low of 2964.40, together with the crossing of the middle MA below the lower MA, could send the price down to the next Fibonacci retracement level (40%) at 2835, or even the 50% level at 2712.

Conversely, if today's high of 3080.20 (which is roughly the present level of the crossed upper and middle MAs) is broken and held, we could see the SPX push above the alligator's jaw and retest last week's high at 3233.13, or higher. Watch for the shortest MA to curl upwards, then the other two, to support higher prices.

The momentum indicator (MOM) has risen back above the zero level today. It's important that it remain above zero to support higher prices in the near term.

U.S. Markets Emerging From Chaos

* See UPDATE below...

The following daily, weekly and monthly charts of the four U.S. E-mini Futures Indices show that they are at the emerging edge of chaos [which is defined by three future-offset moving averages (green 5MA, -3), (red 8MA, -5), and (blue 13MA, -8)].

In all of these three timeframes, the NQ is the strongest and is the most favoured to continue its rally, while the ES is next, followed by the YM and RTY.

In the short term, watch for all three of the moving averages to curl upwards on the daily timeframe (with the green above the red above the blue), and for price to break and hold above all of them, to confirm that a sustainable rally is supported.

In the medium term, watch for all three of the moving averages to curl upwards on the weekly timeframe (with the green above the red above the blue), and for price to break and hold above all of them, to confirm that a sustainable rally is supported.

In the longer term, watch for all three of the moving averages to curl upwards on the monthly timeframe (with the green above the red above the blue), and for price to break and hold above all of them, to confirm that a sustainable rally is supported.

As well, the NQ is the only index that is above both the 50 and 200 moving averages on all three timeframes. These two moving averages pose as resistance or support levels on the YM, ES and RTY on all three timeframes. Look for the YM, ES and RTY to eventually break and hold above both of these moving averages in order to support any further rally and breakout to new record highs by the NQ.

Furthermore, we're about to see a bullish Golden Cross form on the 50 and 200 MAs on the NQ daily timeframe. If that occurs and holds, we'll likely see the rally continue.

If the NQ fails to continue its bullish leadership, we may see all four indices drop to, potentially, new lows, especially if the NQ drops and holds below its 50-week MA (currently at 8245).

YM/ES/NQ/RTY Daily charts

YM/ES/NQ/RTY Weekly charts

YM/ES/NQ/RTY Monthly charts

As of Friday's close, the Balance of Power still rests with the bulls on the SPX, as shown on the monthly chart below.

If the BOP drops and holds below the zero level, that control will switch to the bears on this timeframe, and we may see the SPX drop to around 2675 (the apex of the expanding triangle), or lower.

SPX Monthly chart

The SPX:VIX ratio is holding above 80 and may be headed towards its next resistance level at 100, as shown on the following daily ratio chart.

All three technical indicators (RSI, MACD and PMO) are hinting of higher prices for the SPX.

Under that scenario, the RSI should hold above 50, and the MACD and PMO should begin to swing upwards.

SPX:VIX Daily ratio chart

SUMMARY

If I were a betting woman, I'd say that the SPX has around a 55% chance of moving higher over the coming days/weeks, albeit in a choppy and, sometimes, volatile manner.

Keep an eye on the information and charts that I've shown above as potential directional gauges in the days/weeks ahead.

* UPDATE May 18...

Here's how the U.S. Major Indices fared throughout the day and into the close...

SPX Monthly chart

SPX:VIX Daily ratio chart

S&P E-mini Futures Intraday Targets For 02/24/2020

It's around 12:30 am ET on Monday as I begin to write this post. All four U.S. E-mini Futures Indices have gapped down substantially from Friday's close, as shown on the following daily charts of YM, ES, NQ and RTY.

The ES is hovering above its 50-day MA (3279), while the NQ is still well above, and the YM and RTY are below their respective MA.

All of them are trading either within or below a "chaos zone" of a trio of future-offset 5, 8 and 13 moving averages (green, red and blue). Until they all break and hold above this entire zone, I forecast further volatility and/or weakness for U.S. equities. The downturn in these three moving averages is hinting of further weakness. 

In fact, the weakest of these E-mini Futures Indices is the YM, inasmuch as the 5 and 8 are about to both cross below the 13 future-offset MA. If that occurs and the crossovers hold, watch for increased volatility and weakness, with the other three indices following suit, in the days ahead.

In the very short term, Monday's intraday Pivot Point targets for the ES are (as shown on the following 30-day 60-min chart):

R3 = 3427.67
R2 = 3386.42
R1 = 3362.33
PP = 3345.17
S1 = 3321.08
S2 = 3303.92
S3 = 3262.67

Weekly VWAP = 3297.18
Monthly VWAP = 3340.93
50-hr MA = 3353.53
200-hr MA = 3369.43

All of these levels, as well as the above-noted 50-day MA (3279) represent intraday support and resistance levels (potential targets) for Monday.

Finally, the following daily ratio chart of the SPX:VIX ratio shows that price gapped down and closed below the 200-day MA around the 200 price support level on Friday.

The RSI, MACD and PMO indicators are in downtrend, and price on this ratio failed to make a new swing high when the SPX hit its all-time high of 3393.52 on February 19. The RSI has dropped below the 50 level, the MACD has formed a bearish crossover, and the PMO is about to form a bearish crossover...all of which are hinting at further weakness ahead for the SPX.

BOTTOM LINE:

Unless we see a sharp snap-back in the above 4 E-mini Futures to new highs soon, together with a new swing high on the SPX:VIX ratio, look for increased volatility and further equity weakness in the near term.

Trade War Battles Escalate As The Alligator Bites

My post of July 14 discussed the trade war between China and the US and the effects it was having on China, in particular. Since that date, I added several important updates on that post, which are definitely worth reading...the latest one was earlier today (Monday).

The following World Stock Markets heat map shows the major losses incurred by world markets at their respective closes today...not a pretty picture.

Volatility has ramped up significantly since July 26 and price closed on the following SPX:VIX monthly ratio chart well below the 150 Bull/Bear Line-in-the-Sand level at 115.69.

Price action on this ratio peaked in January 2018 and it has made a series of lower highs, which are clearly evident on the next three charts (depicting monthly, quarterly and yearly timeframes, respectively)...indicating that the successive rallies in the SPX were getting weaker.

A drop and hold below 100 on this ratio could produce an acceleration of the selloff, sending the SPX down to, at least 2600, or even 2400, as I described in one of my updates in the above-mentioned post.

A drop to 2600 would land price on the median of this long-term uptrending regression channel (after nearly tagging a target price of 3047 identified in my post of June 29), as shown on the following SPX monthly chart.

And, as I warned in my aforementioned post of June 29, the alligator formations on the YM, ES, NQ and RTY E-mini Futures Indices have now crossed, hinting of further weakness ahead.

Of note, is price relative to the 200-day MA (yellow). If we see an acceleration of selling to take the ES and NQ below it, I'd say that the SPX has a good chance of hitting 2600, or lower...watch for price to drop and hold below 100 on the SPX:VIX ratio for confirmation. Inasmuch as the YM and RTY are already below their 200 MA, we'll see if they can catch a sustainable bounce anytime soon to lead the other two back into recovery mode. Otherwise, look for the YM and RTY to lead the others in a continued selloff.

CAUTION: Alligator Crossing Awaits U.S. Markets In Mid-2019

* See UPDATE below...

The Dow 30 (YM), S&P 500 (ES), Nasdaq 100 (NQ) and Russell (RTY) E-mini Futures Indices are in danger of being swallowed into their respective moving average "Alligator" formations (where the moving averages are offset into the future), as shown on the following daily charts.

If price is engulfed within and falls below these formations, we'll see high volatility and wild swings ensue, with a possible correction in equities.

Watch for moving average crossovers to the downside, beginning with the green (5MA, -3) below red (8MA, -5), followed by the red below blue (13MA, -8) to gauge weakness and a potential pullback/correction. At the moment, the only E-mini Index where the green has dropped below the red is the RTY (although the other three are a hair's width away from also crossing), so it is the one to watch the closest in the coming days/weeks as a possible leader in weakness and move away from riskier assets.

As an aside, now that a tentative truce and agreement to halt further escalations in their trade war seems to have been struck between the leaders of the U.S. and China in this weekend's G20 summit in Japan, we may see a tepid rise in equity markets.

However, any sustainable strength may be dampened by a reduced likelihood of any kind of substantial rate cut, if any, by the Federal Reserve at their next meeting on July 31.

Source: ZeroHedge.com

If equities do rally, the S&P 500 Index (SPX) will, again, run into resistance around 3000 (a +3 standard deviation of a long-term uptrending regression channel), as shown on the following monthly chart. Price may overshoot to around 3047, which is a 261.8% External Fibonacci level.

To gauge such strength of any upside move, keep an eye on the SPX:VIX ratio.

The following monthly ratio chart shows that price closed out the first half of 2019 just below the 200 New Bull Market level. Furthermore, you'll see that the monthly price swings on this ratio are at variance with those on the SPX. Whereas the SPX has made a series of higher swing highs since the beginning of 2018, the SPX:VIX ratio has made a series of lower swing highs, which puts into question the sustainability and strength of any further rally in the SPX.

Looking at the following three charts of the SPX:VIX ratio, you'll see that each timeframe tells a different tale.

While the first chart (each candle represents a period of one year) appears very bullish for the first half of 2019, the second one (each candle represents a period of one quarter) shows that volatility increased substantially from Q1 to Q2, and Q2 closed on a great deal of indecision. The third chart (each candle represents a period of one month) highlights the lower monthly swing highs, as mentioned above.

Looking forward to Q3, I'd take a shorter-term look at the daily chart of the SPX:VIX ratio, as shown below, along with a couple of technical indicators.

Firstly, if this ratio crosses and holds above 200 to support any renewed rally in the SPX, we could see this ratio reach as high as 220-230, or so, which is a resistance level represented by the apex of a triangle formed by its 2-year price swings. That level would also converge with a 127.2% external Fibonacci retracement level and channel median shown on the above monthly ratio chart. If that level is hit, then the SPX may have reached a price of 3047, as I described above.

Furthermore, in support of such a scenario, it will be important for the RSI to remain above 50, and for the MACD and PMO indicators to remain bullish on this timeframe.

Otherwise, we may see the SPX falter and be engulfed by its "Alligator" to drop as low as 2600, or lower to 2400, as I described in my post of June 2.

* UPDATE August 5...

Further updated details on the alligator formations can be found here in today's post.

Justice Deserved? Justice Served? Market Reaction?

* N.B. This article was originally begun and posted on October 2...I'm re-posting it here, along with numerous UPDATES & my final conclusion below...

* October 2...

As the U.S. Senate vote of Judge Kavanaugh approaches with respect to his nomination to the Supreme Court (pending the submission of an awaited FBI report), we'll see what the majority of the U.S. Senate decides in answer to the above questions.

So far, the following summation from Ms. Mitchell is before the Senate for their consideration with regard to Ms. Ford's accusations that she made against Judge Kavanaugh in her public testimony in the Senate Judiciary Committee hearing last week (September 27).

Equally, Judge Kavanaugh was permitted to appear at that hearing and present his side of the issue. By the way, Mark Twain once said, "The two most important days in your life are the day you are born and the day you find out why." It appeared to me that, in his testimony that day, the Judge found out why he was born...as did Senator Lindsey Graham, I think.

Arising from that hearing (and the 11-10 Committee vote in favour of advancing the nomination to the full Senate) was the Committee request for the FBI to conduct supplemental enquiries to the Senate investigations that have already been conducted on this and relevant matters.

To date, these are the bare public facts on this matter.

What will the Senate do?...

We'll see what happens after the FBI submits its findings...whether justice will be delivered, or not, by the Senate as it (presumably) considers the facts of this matter, as well as all matters related to its prior multi-day Committee public hearing, numerous one-on-one meetings, thousands of pages of documents (including 6 prior FBI background checks that were conducted during his decades of public service in many jobs), hundreds of letters of endorsement and support from friends, colleagues, peers, professional associations, employers, President Bush, etc., and hundreds of written answers that the Judge has already either participated in or provided...and whether, or not, the final Senate vote affects the U.S. markets.

"Guilty" by accusation...

Regardless of the results of the final vote, we'll see if the massive public smear campaign, that is currently being waged against Judge Kavanaugh, continues afterwards by Democrats and the media...or if they will accept the majority rule and move on.

Ask yourself this...

Would you want a Justice sitting on the Supreme Court to have the same wild (lawless, reckless, anarchistic, and, frankly, jaw-dropping) standard that Senate Democrats have embraced, espoused, and repeatedly declared, which is that no one is presumed innocent and that a simple accusation without proof or corroborating evidence is enough to, immediately and forever, pronounce guilt on the accused?

Does anyone still believe in the U.S. Constitution?

Ms. Mitchell's summation of Ms. Ford's allegations...

* UPDATE October 3...