Below is my view of what's going on. For the images (charts/table etc) mentioned, please visit this page.
What do you think? What are you watching closely next week?
__________________
VIX Indicators
Despite the volatile market after the CPI data report on Wednesday (7/13), the Pentile Rank (PR) of VIX in relation to VVIX, VIX9D, VIX3M, and VIX6M have all started to decline.
This may indicate the current uptrend will continue. I know it may not feel like the market is in an uptrend with such a volatile market, but SPX Technical Analysis shows the uptrend line is still intact (more details in the below section).
SPX Technical Analysis
In the last week’s Technical Analysis, I expressed a personal bias of the market likely to go higher a little more. This bias was based on the fact that the market broke the shorter-term downtrend line and crossed the 25-day Moving Average (purple line).
Obviously, this week the market not only moved below the 25-day Moving Average but also broke below the short-term uptrend.
However, Friday’s market (7/15) recovered substantially to bring us back within the short-term uptrend line with a gap up.
Housing-related data and Purchasing Managers’ Index will be the main economic data focus for next week.
It will be interesting to see if the market will do both
- Break the 25-day Moving Average
- Maintain the current uptrend line
My personal bias is there will be a pullback to fill the gap formed on Friday, then continue the uptrend trajectory.
FOMC meeting is coming up at the end of July so this short-term uptrend might continue until then with wild swings.
In a longer-term view though, we are still in the bear market until there are clear indications that the overall market trend is changing.
The market will approach the longer-term downtrend line (green line) sometime in August, assuming this sideways move continues.
If the market resolves to the upside, then we might see a major trend change. Until then, my plan is to hedge pretty heavily to counter any downward moves.
Leave a Reply