A Very Exciting and Important Week for the Markets?

By: Marty Chenard | Tue, Feb 3, 2009
Print Email

It was on October 24th., that the VIX (Volatility Index) had hit its high. The VIX moves opposite to the market, so a high on the VIX should normally correspond with a low on the S&P 500.

But ... that wasn't the case. It wasn't until almost a month later that the S&P 500 finally hit its low. (The S&P low was on November 21st. ... at 11:30 AM on a 60 minute chart.)

That was an important event.

Why?

Because when the S&P finally hit is low, the VIX was showing a positive divergence with the S&P's low.

You can see that event on the chart below, where I inverted the VIX's chart so that it would track in the same direction as the S&P. (Remember, this means that as the VIX is moving higher on the chart below, that it is actually becoming numerically smaller since it is inverted. See the scale on the right hand side.)

So, that positive divergence set the VIX up to move higher on the inverted chart below (which was actually a move that would become numerically smaller). This became a positive event for the market since that November event.

Have we now come full circle since then?

Since November 21st., the S&P went up and then back down to close its Nov. 21st. gap. Now ... a multi-month decision is at hand.

Why?

Because the S&P 500 had set its support line when the gap was closed ... see labels 1 and 2 on the chart. At the open this morning, the S&P came down and rested on that important "support line". At the same time, the VIX gapped down this morning, but remained above its inverted support line. So, there was a positive divergence coming from the VIX.

One more thing to note: At label 2, the S&P came down even to label 1 and closed its gap. However, at the same label 2 point (which was label 4 on the VIX), the VIX wasn't even close to being at the same level. In fact, the VIX was way up at label 5 ... a huge positive divergence from the S&P's level.

So here is where we are today ...

1. The S&P is at a critical support level on a 60 minute chart, and that support goes back to last November.
2. The VIX has a positive divergence that was established on January 20th.

This means that we are going to have an important Bull vs. Bear battle this this week ... starting today. Two months of progress is at stake, so it will be important for the S&P to hold ... to hold first above today's support line, and then to HOLD its November low. Holding one or both would be in line with a basing process for the market.

Falling below the November low would be a act of losing the battle to the Bears ... which would mean exposing the markets to the possibility of making new lows. Like last night's Super Bowl, this could be an exciting week.

 


 

Marty Chenard

Author: Marty Chenard

Marty Chenard
StockTiming.com
Asheville, NC 28805
Tel: 828-296-1200

Marty Chenard is an Advanced Stock Market Technical Analyst that has developed his own proprietary analytical tools and stock market models. As a result, he was out of the market two weeks before the 1987 Crash in the most recent Bear Market he faxed his Members in March 2000 telling them all to SELL. He is an advanced technical analyst and not an investment advisor, nor a securities broker.

StockTiming.com is dedicated to Stock Market Investors who want the best information on stock charts, stock market trends, stock market timing and technical analysis.

Be My Guest and Take Advantage of Our Free Membership ... Get a Free Membership to StockTiming.com ... Youll receive important daily messages before the market opens and direct links to todays important web pages. Information and messages that are often not posted on our website. There is no obligation or expectation on our part ... it is just our way of proving our accuracy and timing expertise to you. Please click here for your Free Membership.

Copyright © 2006-2014 Marty Chenard

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/