Stock Market Short-term Support May Come Into Play
Stock-Markets / Stock Markets 2018 Jan 31, 2018 - 09:39 AM GMT
SPX is getting some lift at the Short-term support level at 2815.25. It suggests that may be the downside limit for this decline. If so, it may have its work cut out for it at the gap, which refused to be filled this morning. My best estimate is that SPX may make a probe (lower) to the Short-term support level before attempting a bounce.
However, the situation is fluid and a break of Short-term support could cause the wheels to fall off…
VIX is now using the neckline at 14.60 for support. This may confirm the validity of the Head & Shoulders formation and an indication that there is more rally ahead.
ZeroHedge comments, “Well, that escalated quickly...
The Dow is down 400 points - the biggest drop since June 2016's Brexit vote surprise - and down over 600 points from its highs yesterday...
As is clear above, VIX is also spiking - back above 15 for the first time since August.”
The Hi-Lo Index remains in negative territory, reinforcing the sell signal. I have been taught that actual confirmation comes at the close, but the Hi-Lo has been hovering near the bottom all day. So, it’s not a done deal yet, but looking awfully good.
A look at the monthly VIX chart shows an interesting phenomenon. VIX is actually in a 20-year Broadening Top! If the past is any indication, we may see the VIX go to the top of this formation in the next 12 months which I have estimated to be 133.32. It could actually be higher.
If I recall correctly, the old VIX (VXO) went to 149.00 in the 1987 crash. Unfortunately, my VXO chart only goes back to 1990. It was said that it was “broken” and that is when the new VIX was re-formulated on January 19, 1993. You see, VIX is measured in percentages and it should not go above 100.00.
Could it happen again? I believe so. Wall Street will find a way.
Regards,
Tony
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