As we have expected, bear sign 3 was fulfilled (Read http://strongerhead.com/?p=3313 for reference for the 3 bear signs). VIX does not like to be oversold and it rallied away from that zone with vengeance causing the market to be dragged down or the week. I’ve closed out my longs on Monday to protect my profits. Let’s take a closer look at the charts for signs again.
On the monthly chart, Sept looks set to close on a bullish note, but in the last 5 month, prices have been struggling to make new high (red horizontal forming strong resistance for the bulls). Based on 2007-2008 period, prices did behaved in a similar fashion. RSI reached quite extreme overbought zone, but prices failed to break new height, and after 5 months of trying, bulls lost its steam.
On the weekly, Bear sign 2 crystallised forming a bearish candle for last week closing. But not enough to change its tide yet, as Bear sign 1 has not been completed, with price holding in the middle of its price envelop. (Read for reference on the 3 bear signs)
VIX (Fear index) weekly trend is still trending sideways, with some room to move upwards before it hit its major resistance. This is in line with VIX daily analysis, as its price has some room to go before it reach the top of the green box. But we can expect VIX to pull back anytime now as it enters into overbought condition.
Summary:
The charts are not looking bright for the bulls.
Long term:
Trend is UP. But there’s danger of bulls losing its steam again based on 2007 – 2008 price behaviour.
Mid term & Short term:
Mid term trend is still UP based on the weekly chart. But for it to hold, daily price must not fall further into the lower end of its price envelop. If not, mid-term trend will turn DOWN.
In the coming week, VIX might pull back 1st, and overall market will rally away from its oversold zone. If so, look out for the rally’s ability to hold and sustain momentum. If it fails and break below daily price envelop, fear is in control.
Cheers
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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.
