What to expect now. December 10, 2001. Ord Oracle
marketweb.com
The VIX on the NYSE have made important lows between 20 to 25 in the last 12 months. The new short term low on the VIX was hit December 5 with a reading of 23.62, the day before the top of December 6 (So Far). The big run on December 5 occurred with an ARMS index close of .39. The last reading this low came on May 16 (.39), three days before the top that lead to the September 21 low. The "5 day ARMS" also have been warning that a top is fast approaching with the last couple of days readings below the 4.50 range, which is bearish. The McClellan Oscillator closed today at -48, well below the "0" line and in bearish territory. These types of divergences come at intermediate term tops. Today the SPY traded below the low of the break out day and signaled a short on the SPY at 115.50. With the bearish intermediate term divergences on the McClellan Oscillator, VIX and the "5 day ARMS", we expect the market to trade down for the next couple of weeks. Our first downside target on the SPY is near the 110 level. We are short SPY today at 115.50, with a stop at 118.00.
The VIX on the Nasdaq is also in bearish territory, hitting a low at 46.57 on December 5. The December 5 close on the Nasdaq ARMS was .25. The only other reading this low this year came on May 21 (.24), the day before the top that led to the September 21 low. The Nasdaq McClellan Oscillator has been diverging for the last several weeks and today the Oscillator broke below the "0" line, creating a bearish sign. The price and volume studies are not real bearish here. There is a chance the NDX could make an attempt to test the December 6 high before topping out. We will wait and see for the moment. It appears the NDX had a valid breakout to the upside on December 6. If that valid breakout fails, than it is said that the market will reverse and break out to the downside. We think at the moment that the NDX had a false breakout to the upside, but has not failed yet. Flat the NDX for the moment. |
