On Sunday I mentioned that since SPX ended last Friday with a Doji candlestick having reached a significant support zone (Long-term horizontal support + 0.5 retracement of the June-September up leg) the odds were favoring a countertrend bounce.
Below is the weekly SPX chart I showed in the weekend technical update:
Unfortunately yesterday's low volume/choppy session has not solved yet the outcome of the short-term pattern leaving the door open for both directions.
- Third consecutive eod print < 200 dma favors the bears.
- Yesterday's unexpected 6.5% plunge of VIX favors the bulls.
If, despite an oversold daily stochastic and the positive divergence I discussed in the weekend update of the NYSE Adv-Dec Volume, price does not hold the 1370 support area then I expect a quick move towards the 50 wma = 1363.
On the other hand if bulls win this "fight" then I expect an "oversold" bounce that should "only" retrace a Fibonacci # of the down leg off the November 6 peak.
There is a lot of overhead resistance in the range: 1396 1405.
So far it looks unlikely a move above the 0.618 retracement at 1410.
Today I will closely monitor the USD Index, since if the wedge plays out then the "Risk on" will be temporarily turned on.
I say temporarily because in my opinion the USD index has not completed yet the countertrend rebound off the September 14 low, therefore I don't expect price to break the pivot support at 80.365.
Regarding VIX, yesterday's 6.5% drop, which came out of nowhere, is difficult to explain.
I have drawn a new trend line support which is critical in order to maintain undamaged the trend to the upside.
Also the RSI is threatening to breach its trend line support.
If the 16 area is breached then a drop toward the lower BB will most likely be unavoidable, although such a move at the moment appears to be unrealistic.
