Price Headley's  Instablog

S&P 500 & VIX Chart

Had it not been for Friday’s 0.32% dip, the S&P 500 would have actually ended the week with a gain. Instead, the close of 1091.4 was 2.10 points under the prior Friday’s close, down 0.19%. Even if the index had closed higher though, the standing problem would no have been resolved.

We plotted the arc-shaped support at resistance last week; they are still very much in play. We did have to adjust the upper one slightly higher to accommodate the slightly higher high of 1113.70 from Monday, but the zone still stands… the SPX is still hitting resistance at that line. Assuming the pattern repeats, the S&P 500 is still headed toward support around 1031.

This time the bears have an ally though. The VIX finally brushed its lower 20 day Bollinger band (2 SDs) at 19.59, and pushed off of it to close at 22.19 on Friday. With no room to move lower and plenty of room to move higher, the VIX is another strike against the bulls.

NASDAQ Composite Chart

The NASDAQ closed even lower for the week, losing 21.84 points (-1.01%) to end Friday at 2146.04… the biggest loser among the major indices. While the NASDAQ’s version of the VIX (the VXN) isn’t pushing off its lower Bollinger band, there are still plenty of bearish clues for the chart.

The biggest is the stochastic indicator at the bottom of the graph. Overbought? Yes, but more importantly, the composite is starting to correct that overbought condition – the evidence comes in the form of stochastic lines that are falling back under the 80 threshold. While stochastics is far from a perfect tool, we’ve seen the index peak and bottom in perfect sync with stochastics since September. The fact that the ebbs and flows also occur at the now-established (and diverging) support and resistance lines augments the recent run-in with the ceiling.

Bottom line? We have to assume the NASDAQ is headed for the floor around 2000.

DJIA Chart

Nothing particularly new or significant here, though it’s worth noting the Dow ended the week with a slight gain. On the flipside, the Dow’s heaviest volume came on Thursday and Friday – the only two days the market lost ground last week. In fact, Friday’s volume was higher than Thursday’s. That’s a bearish sign, in that traders are really not interested in ‘taking them home’ over the weekend. Indirectly it points to low confidence and conviction.

We’re looking for the Dow to mirror its counterparts and head back to support lines. For the blue chip index, that’s around 10,025, though there are a few support lines to choose from.

Economic Calendar

It was a very busy week in terms of economic data, and next week promises to be nearly as hectic.

By and large the news was good, even if it didn’t push stocks upward. Retails sales were up, inventories were down, capacity utilization was up, and inflation was tempered. Normally that’s the kind of fodders the buyers respond to. And, eventually they will as long as those basic trends remain in place.

As for next week, the biggies are Monday’s existing homes sales, followed by Case-Shiller, GDP and consumer confidence on Tuesday. Don’t worry too much about GDP, though the other two items could shake the market up a bit. New home sales on Friday will be a big one too.

By the way, since we look at it in way too much micro (short-term) detail, here’s a longer-term look at capacity utilization to offset the knee-jerk reactions to this past week’s announcement. It’s been rising since hitting a multi-year low in June. That’s an outstanding long-term sign; most major bullish periods are accompanied by rising capacity utilization rates.

Trade Well,
Price Headley
BigTrends.com
1-800-244-8376

Disclosure:  None

So FORTUNE magazine has crowned a CEO of the Decade, and it's not surprisingly Steve jobs, head of Apple (AAPL). No doubt Mr. Jobs has indeed done a wonderful job, even I recently joined the iPhone revolution and it's a fantastic product.

The S&P 500’s got a couple of things working in its near-term favor.

The first one is the CBOE Volatility Index (VIX). It’s falling, but it’s still got plenty of room to move lower before a likely floor at the lower Bollinger band (20 day, 2 SDs) steps in around 18.40. You’ll also see the VIX peaked and reversed at what’s become a pretty significant resistance line of its own. We’ll probably be looking at that resistance level again in the future.

The second bullish case for the market stems from the fact the S&P 500 (and the other indices too) have made their way back above the 50 day moving average (purple in the following chart). If this instance is anything like the July instance, then the proverbial ‘reset’ effect of the small dip could be enough fuel to carry us through the end-of-year rally. We don’t think a repeat is likely, but the market seems intent on testing the premise.

SPX Daily Chart

MARKET TIMING:
STOCKS: Bullish (as of 10/08/09 close)
GOLD: Bullish (as of 05/2/09 close)
BONDS: Bearish (as of 10/16/09 close)

The market data above comes from our BigTrends Market Timing, a systemized timing model developed by Price and our analysts.  All subscribers to our premium advisory programs receive the Market Timing each trading night.  In addition, it is available as a standalone subscription (with nightly charts and commentary) - call 1-800-244-8736 for information.

As earnings season continues, we've reached some key levels on both the S&P 500 Index (SPX) (SPY) and Dow Jones Industrial Average (DJIA) (DIA). 1,100 on the SPX and 10,000 on the DJIA are levels that must hold, if we are to continue to rally to the upside.  Overall, we haven't been vastly impressed by the market's reaction to various earnings reports ... it looks like expectations may have been a bit high.

Taking a look SPX Daily Chart below, you can see that we've had some trouble overtaking the 1,100 level this week.  Many are keying on the 1,100 to 1,150 area on the SPX as an important technical area and possible resistance.  The underlying trend does continue to look to be to the upside, however, as Percent R is strong ... and we've bounced after every market pullback in recent months.

SPX Daily Chart


The Dow Jones Industrial Average is also around a key level, one that many in the major media and "armchair" traders are watching:   10,000.  You can see in the following chart that overtaking 10k would put us back near the pre-October 2008 levels.  Weekly Percent R remains in strong territory on the DJIA, indicating the underlying trend is still bullish. 

DJIA Weekly Chart


As far as volatility, we saw the CBOE Volatility Index (VIX) break down to new medium-term lows recently.  Today, the VIX nearly penetrated the 20 level on the downside, only to bounce higher.  It now looks as if we are in a 20 to 23 range on the VIX for the near-term, with upside contained in the 24/25 area.

VIX Daily Chart

Bottom Line:

MARKET TIMING:
STOCKS: Bullish (as of 10/08/09 close)
GOLD: Bullish (as of 05/2/09 close)
BONDS: Bearish (as of 10/16/09 close)

Trade Well,
Price Headley,
BigTrends.com
1-800-244-8736

Disclosure:  Currently in a long Gold stock option position for Options Shark subscribers.