Moment of Truth?
Are we approaching a "moment of truth"? ... where the market finds a bottom, or loses critical support that has a more serious down move?
Let's explore 3 charts where we can get an understanding of the juncture we have now come to.
First, we will take a look at the New York Stock Exchange daily "New Highs". Strong rallies have New High levels above 100 ... preferably 150. This chart shows the correlation between the market's up movement and current down movement. Note how the New Highs have been below 100 since November and how the S&P 500 has continued down ... making lower tops and lower bottoms.
What is interesting about this chart, is the resistance line that has been in place since October. Note how the New Highs can't go much lower without breaking to the upside of the resistance line.
If a breakout occurs with levels above 100, then that will be bullish.
If however, it breaks out and remains below the 100 level, then that would remain bearish over the longer term even though we could see a short term upside move.
If it moves above the resistance line and remains below 50, then we could see a prolonged down move. See the next chart please ...
This is a long term view of the SPY. Note that there is a critical support line at 136.75. We are there now ... and we will test this support level in the next few days. Falling below it would have very negative long term implications.
Coinciding with the SPY, the Institutional index of "core holdings" is also at a long term critical support level. Note the the Institutional Index is now at the support line on this 5 year upward channel. The stocks represented on this chart/index are the top stocks owned by Institutions which reflect's a major portion of their investment money.
We are now at a very important market juncture where a market direction has to be decided within the next few days.
(Note to paid subscribers: Yesterday, we posted a Special Report that
answers the following questions:
What's going on in the market?
What significant change has occurred since December which is abnormal?
Why is the VIX holding steady while the market drops?
If you are a paid subscriber and have not read the Report, please login and follow the link on the Summary page.)