Last week as discussed, the market did rallied to re-test its previous high before it pulled back (refer to my previous week’s analysis at http://strongerhead.com/strongerhead-weekly-financial-market-analysis-10-dec-2012/). I did a very short term trade on VXX believing prices will pull back upon meeting its previous high. However, it does not mean I am now bearish of the market outlook. Or should we start to be bearish?
No one can predict the market. Especially in times of such situation, let the price tells you what the market is doing, and take the lead from there. On the weekly chart, RSI reading is still above the red line (as marked on the chart), EMA is still telling me the market trend is still up. But the candle is looking bearish, as price rejected its previous high, and closed below the low of the week.
On the daily chart, the EMA signals a danger of bearish cross over. As the trend is still up, we have to give the benefit of doubt that this is a pull back from the UP leg. As price almost hit the top of its price channel last Wed, and begin to retrace from it overbought zone. And again, we are going to start the week in no man’s land (not overbought nor oversold).
VIX (the fear index) is still trending within a $2 range. And it is near its high of the range. It must hold to keep the momentum going. Watch the price movement carefully to determine what’s the market’s take, bull or bear?
Summary:
Mid term view:
Base on RSI and EMA, the market is still up. Although the up run is weak, but we need to follow the trend.
Short term view:
I believe the market can go slightly lower into oversold zone on the daily, which means VIX would retest its previous high, and a reaction will happen (Ie: VIX might pull back from its previous high, DJI and S&P would bounce off from its oversold condition).
NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice
