Saturday, October 31, 2015

Market Makes Little Progress

Major US markets made little headway this week, advancing just 0.1% on SPY to close at 207.93.

While momentum appears to be slowing, price is still holding the 4 day moving average. 

As price has changed little, so have my observations, on the weekly basis.

The standard deviation chart still remains within the channel I've been watching for the past couple of weeks. 

Price continues to respect the head and shoulders neckline as seen on the weekly line chart.  It might have been testing the neckline during the day however, price broke down in the final hours dropping from 209.44 to close near the lows of the day.


The data shows price continuing to muddle along to the upside with no real evidence that a top might be near other than the possible resistance areas demonstrated above.  One other observation that might add to a downside case is the short term monthly chart.

I'm always looking for three period tests of something, and often they prove to pan out.  If we look at October's monthly close, it failed to take out the close of three months ago, 210.45.  That's not really a lot to go on though.  Monthly momentum has been strong so does it reflect genuine strength for the long term?  Or is it one of those "bear market rallies" that are short and swift?

The daily data shows that even as prices have stayed elevated, momentum is quickly dwindling.  Yet on the very short term, price continues to hug the 4 day moving average even on the quick move down at the end of the day/week/month. 

I closed out my November long calls Friday and established an initial position in SDS, a 2 time inverse ETF on the SPX index.  I'm still maintaining the long January 200-215 call spreads acquired when SPY was below 195.  Not really sure what will happen next.  My gut tells me that we are near the end but seeing how markets often react sharply to any Central Bank activity, anywhere in the world, and how it tends to ignore seemingly important negative situations, it's hard to totally commit to the downside.  I suppose that if the Fed read that comment, they would be thinking

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