Tag: CBOE Volatility Index

The S&P 500 broke support at 1770, confirming a secondary correction. At times like this it pays to look at monthly charts to gain a long-term perspective. The first line of support is at 1700. Respect of the secondary trendline would flag a weak correction indicative of a strong up-trend. Breach of that level, however, would suggest a strong correction to 1550 and the primary trendline. The scale of the bearish divergence on 13-week Twiggs Money Flow, when compared to the divergence in 2007, suggests medium-term selling pressure — typical of a secondary correction rather than a (primary) reversal.

CBOE Volatility Index (VIX) crossed to above 20, suggesting moderate risk, but not yet cause for concern.

The Nasdaq 100 retreated below 3500, warning of a correction. Again, the bearish divergence on 13-week Twiggs Money Flow appears secondary and no threat to the primary up-trend.

Both the S&P 500 and Nasdaq 100 have exceeded their targets. Absence of a significant correction for several months indicates extreme bullishness, but makes the advance more precarious as buyer/seller imbalances grow.

The S&P 500 is testing medium-term resistance at 1850. Breakout would confirm a target of 1900*. Respect is less likely, but would warn of a correction if followed by reversal below 1810. Rising 21-day Twiggs Money Flow suggests (short-term) buying pressure, but reversal below the rising trendline would warn of medium-term bearishness.

* Target calculation: 1850 + ( 1850 – 1800 ) = 1900

Declining CBOE Volatility Index (VIX) readings for the S&P 500 continue to indicate a bull market.

The Nasdaq 100 is similarly testing resistance at 3600. Twiggs Money Flow troughs high above the zero line indicate strong buying pressure. Absence of a significant correction makes the advance more precarious, but the imbalance can endure for several months.

* Target calculation: 3600 + ( 3600 – 3500 ) = 3700

Declining CBOE Volatility Index (VIX) readings for the S&P 500 continue to indicate a bull market.

The S&P 500 itself is headed for another test of short-term resistance at 1850. Breakout would confirm the target of 1910*, while respect would warn of a correction, especially if followed by reversal below 1800. The recent decline in 13-week Twiggs Money Flow was secondary in nature and less severe than the corrections in June and August 2013; troughs high above the zero line are a long-term bull signal.

* Target calculation: 1810 + ( 1810 – 1710 ) = 1910

The Nasdaq 100 continues its accelerating up-trend, with Twiggs Money Flow troughs above the zero line indicating long-term buying pressure. The last decent correction was in June 2013 and continuation of the advance much further without a correction would suggest the market is becoming over-extended.