The Good, The Bad, And The Ugly

I have a mixed perspective on the situation in equities right now. It’s impossible to predict the direction of the resolution of the current impasse but it’s clear to me that it will be explosive. At this point I do not see any conclusive evidence that signals a low is likely to be in place. In other words, if the bears can muster up the mojo there is still downside potential left on the books. Of course that does not rule out a bounce – so to make sense of it all let’s look at three key charts which I present as the good, the bad, and the ugly.

Here’s some theme music to get you into the spirit of things 😉

The good: Clearly we have established and thus far held support on both the daily and the weekly. On the former it’s the 100-day SMA and on the weekly it’s a NLBL at 1765.5. Unfortunately for the bulls it expires today and that may make it easier for the bears to slip by it – granted the five period expiration is arbitrary but let’s agree that this support line is getting long in the tooth. It also has only been touched once which lowers its significance. In any case – the bears have not taken us below 1760 and that is the good news.

The bad:  VIX volatility – i.e. volatility of volatility – is expanding. The bulls had the opportunity to produce a VIX buy signal (relative to equities) on Wednesday but slipped on a banana peel. This keeps expanding the BB and that will make it harder for such a signal to materialize. So it could get uglier here before it gets better.

The ugly: Since this morning we’ve been pushing up – tepidly but if you’re long you take it right? Well, at the same time buying volume seems to be below or at best on par with selling. So I don’t sense any real mojo here. It’s Friday and a lot can happen over the weekend but in the end this is starting to ‘feel’ (forgive me for using that word) just like the gyrations we endured near the top. The bulls have not shown us any gusto for being long and there may be consequences on the horizon. Because if it slides below ES 1760 it’ll most likely fall off the plate. Be prepared!

Two bonus charts below for my intrepid subs – and those are actually very cool 🙂

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Enjoy your weekend!