It has been a bearish X’mas trading week. 5 down days in a row. The first level of support failed to hold. For now, will the support at 1400 on the S&P hold? Is the market going to fall off the cliff?
Like I said last week, I was watching the RSI reading like a hawk. It has now hit a critical level. The mid-term trend might be in the mist of changing its tide if the current support level of the S&P 500 does not hold (at 1400 points).
On the daily, we are in a confirmed short term down trend. Currently at the oversold zone based on RSI, and my price channel. A potential bounce is possible next week, but we had not gone into an extreme oversold condition yet. There’s still some room for more pull backs base on my channel envelope.
VIX (Fear index) on the weekly and on the daily both are in overbought zone based on RSI. But that has caused VIX to be on an uptrend. Usually, a pull back can be expected before the trend resumes again. But for me, VIX would faced its extreme stretch at the pink zone of the weekly chart.
Summary:
Mid term view:
The trend up trend is on thin ice. Bulls walk with caution.
Short term view:
Short term bounce possible with the current oversold condition. If that does not happen, you know who is in charge to welcome 2013.
Cheers
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NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice.
