Wednesday, July 6, 2016

S&P 500 - No Green Light Yet

It would be very easy to get excited about the bullish implications of advancing S&P 500 E-mini from the low earlier this morning.  A 24 point (1.1%) advance is clearly an attention-getter from any starting level.  However, we might ‘demand’ just a bit more if we are to discount the bearish reverse of the Friday/Tuesday price action.  Violent price swings have become more the norm and the more rigorous we are in creating high hurdles for our attention, the better our time (resources) are spent.   

Price action over the Friday/Tuesday period formed a ‘bearish engulfing’ on candlestick analysis.  This beaish reverse was evidenced not too far from the recent topping price action of June 24th and the early-June top toward 2110 giving added ‘bearish’ value to this more recent development.  We might become more confident in the bullish prospects today should ESU6 find settlement above the ‘mid’ from Tuesday (2091.35).   

In order that we discount the bearish reverse, we would want to see more than half of the bearish ‘body’ from yesterday’s decline removed on settlement today.  Thus far, ESU6 has seen a high of only 2090 today and would need to settle above 2091.35 to more fully discount Tuesday’s bearish session.  Even so, unless ESU6 settled back above 2100, today’s price action would for a ‘bearish hanging man’.  Here, despite the recovery today, we would have to note the inability for ESU to make any meaningful progress in its advance, thus further questioning the resolve of the bullish contingency in advancing prices above recent highs. 

A quick look to the VIX might offer other valuable insight.  Having given us a wonderful read at the spike high of June 24 (‘hanging man’) and June 27th (‘shooting star’), the VIX fell hard giving back all but 2 points of the advance from the April-June lows.  Today’s price action, like yesterday failed to move lower.  We would not be as concerned about the fall from the VIX session high, but rather would concentrate on the fact that for a second session, VIX failed to make ‘meaningful’ new lows.  Additionally, were the VIX to settle near current 15.73, it would form a ‘bullish inverted hammer’, again giving rise to concern for the conviction of those who whould have been selling volatility (expecting calm and bullish(?) equity).   


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