Weekend review

Good thing for bear is that finally we have a solid down one in the past 10 weeks.  But it could be better if we take out 879, which is the low of a week before, which would make the move more meaningful.  Now we form a inside bar, which means whole body of the candle bar is within the previous one.  Inside bar is usually an indecisive pattern and the edge to either side is 50-50.

 

 

 

In the near term, RMO system gives out the sell signal on SPX.  same thing happens to all major US stock index and sector ETFs.  however, RMO is still in the bullish zone and bears need to push further more to get it red.  In the bullish zone, like in a bull market, the strategy in buy dip and sell high.  But i won’t take it this time since the big picture is still down on weekly chart.

 

 

MACD also gives the sell signal.  Some midterm player trade on this signal should kick in now.  20 MA, the mid of the BB line, still serve as a good support for last Friday’s close.  This line has supported this market really well since the rally starts.  If bears have some concern, this should be a big one.  What if we are retesting again and then moving higher towards the upper boundary @ 950?  200 MA is in that area and a test is indeed possible.   we need to keep our minds open…

 

VIX is forming a bullish wedge and both sides of the wedges have been tested at least three times.  If the wedge get broken.  I would expect a retrace at least 50% of the wedge and would not surprise if we fully retrace it based on the large positive divergence on MACD histogram we have.  Also read this from reuter:

 

"About 73,000 call options on the CBOE Volatility Index have changed hands, already exceeding their norm ahead of next week's expiration, according to Trade Alert. 'It looks like traders are placing upside bets on higher volatility in May and June,' said Chris McKhann, analyst at optionMonster.com. The May 42.50 strikes are among the busiest contracts with 19,861 traded against an open interest of 25,767 lots, Reuters data showed. Some traders might be closing positions ahead of next Wednesday, when VIX May options go off the board, said WhatsTrading.com options strategist Frederic Ruffy. The June 37.5 and 55 VIX calls have also attracted interest, with more than 10,000 and 31,700 contracts traded, respectively”

 

 

Institution buying and selling vice, the tide is changing.  the accumulation (blue curve) is dropping sharply, meaning some big money are not chasing this game any more.  I would expect very sharp drop off kicks in till the blue curve and red curve cross each other.