As mentioned last week, VIX was facing the short term resistance, and we are expecting a pull back in the beginning of the trading week. Similarly, a slight bounced on the Dow and S&P by the bulls happened too in the start of last trading week. As discussed last week, if the rally has no follow through, the force would be with the bears. And indeed, the bounced attracted more supply from the bears, causing the market to end lower last week. Now the question is, will the market continue to go lower? If so, how low can it go?
The intermediate term, our big brother (Dow) is in its mid-term down trend. S&P is still slightly resilience. However, if both RSI is not going to pull back up above the green zone (refer to the chart), we should be in for a deeper pullback, probably to the lower edge of its envelop.
The short term showing some potential sign of a possible fight back from the bulls. Although the trend is still clearly down, RSI is now in oversold zone. In the last 1 year, when RSI is in such deep territory, a rally took placed. Right now, this would also increase the chance of a possible rally. But a rally does not necessary signal a reversal of the downtrend. It might only be a bounce from a down trend. The importance is the ability to follow through if it rallies.
VIX (Fear index) weekly is moving slightly further away from its support level, creating a mid term up trend, with more room for further moves before it reaches the its resistance.
VIX daily has reached the top of the green box. This might act as a short term resistance and warrant a pull back.
Summary:
Long term view:
Monthly trend is UP
Mid term view:
Weekly trend is DOWN. Let’s see how much follow through the down trend can resume its power next week to determine its strength.
Short term view:
VIX is in its short term resistance. Dow and S&P is in short term support. This would stage a possible rally again. Again, there’s no guarantee that it will happened. But if it does happen, watch if there’s follow through from the rally. Without a strong price follow through, the force continues to be on the bears’ side.
Cheers
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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.
