We had a very short trading week due to Sandy. On Wed when the market opens, Dow and S&P500 rallied off support to its short term resistance, and pull back to near support zone. Is this a bullish sign or a bearish sign? Let’ take a look at the charts.
On the weekly chart of Dow and S&P, both are in sync, still on the down trend as confirmed by the EMA. Both are off its support level. But the S&P looks less bearish than the Dow. Prices are almost back to where it is two weeks ago.
On the daily chart of Dow, Fri’s price movement looks bearish as compared to S&P. In any case, if RSI continue to move upwards next week, Fri’s pullback is just a scare to shake off weak bulls. Should RSI heads back below 40, downtrend continues. But I have a feeling prices will move sideways until the US election is finalised. I prefer to concentrate on support being 1400 and resistance at 1435 (on the S&P) as the trading range until the patterns and indicators tell me otherwise.
VIX (Fear index) is still hovering near its resistance zone. The weekly says VIX is still in Uptrend. Daily seemed to suggest last Thurs is a dip in an uptrend. It broke short term support and reverse upwards with a vengeance. This is a sign of bear strength. I kind of expect the 1400 to be re-tested again should the bear takes action next week. That will bring VIX to above $19 again. If it does not pull back, market is going to go down further. If it does pullback, i’ll still bet on the trading range to hold.
Summary:
Mid term view:
Market is down and has stayed down for the 3rd week.
Short term view:
Market might range till US election is over. Watch the support and resistance to hold for the time being at 1400 – 1435 on the S&P.
NOTE: All information provided “as is” for informational purposes only, not intended for trading purposes or advice
