There is speculation out there that maybe the right shoulder has indeed completed its formation. I don't believe that is true, but I would not rule out any more short term selling in the next few sessions. At the latest, Wednesday of next week, the market should find some short-term strength and begin its way back up to form the right shoulder. If that does not happen, but instead we sell-off into all of next week - then the right shoulder will have been formed in only two sessions. Now I've mentioned this before, and I'll say it again. Next week is options expiration week. As a general rule, the specialist on the exchange manipulate prices back up so their options expire worthless. So why is next week so critical? Well, the specialists have deeper pockets than you, your neighbor, or even the wealthiest friend you know. If they can't hold up the market next week, then who else can? I think I hinted to that idea in my previous post.
Now on to the markets, starting with the S&P 500. I think it was Wednesday of this week that the market made an attempt to bounce, and almost everyone had their doubts. Thursday showed signs of strength, suggesting that maybe it was not a bounce but a buying opportunity. Friday's session basically wiped out all of Thursday's gains, of which came from the last hour of trading. It's funny how the mentality will shift on a dime. Everyone felt a little bit better and possibly more confident to begin their purchases of stocks, until the bear came back to drag you back in its den.
S&P 500 - Daily Chart
Stocks and the remaining asset classes of the marketplace are at the mercy of the U.S. Dollar. Friday's strength will more than likely spill over into next week, so we should expect for a little more follow-through in the coming days.
The Dollar - Daily Chart
Volatility is beginning to rise and also leaving some foot prints behind. The 50 day moving average is a lagging indicator, but gives the best readings when its slope is noticeably changing. The white line was in a clear downtrend, but now I see it flattening out. Expect for that same moving average to curl up and begin to rise.
The VIX - Daily Chart
Have a Great Weekend,
