The VIX has been in a broad trading range since the October highs, with the 10/20 moving averages turning back to positive on November 20th. Clearly the fear level is still high, but a daily close below 52 would be the first sign that a top was in place. For now, expect more wide ranges.
The stock market's ability to rebound Wednesday was encouraging, as the McClellan Summation Index and NYSE new lows both show positive divergence. There were fewer new lows on 11/20 than on 10/10. The Summation Index is also back above its 21 WMA. We need more strength to confirm these signals.
The selling overseas has been just as heavy as in the US. The charts of the Nikkei 225 and the London FTSE All Share Index show the recent trading ranges. If a short-term bottom is not forming, the other interpretation is that these are continuation patterns that will lead to another leg down in the bear market.
Yesterday's sharp plunge in the market erased some of last week's gains and the financial stocks continue to be leading the market on the downside. The monthly chart of the Financial Index shows that the RS chart turned negative in early 2007 and these stocks continue to be weaker than the S&P.
Even though last week's holiday trading is somewhat suspect, the higher weekly close in the S&P 500 was encouraging. The momentum is still rising, but needs to move through its downtrend to turn positive. Still, major resistance is at 950-1000 with key support at 800.
Tom Aspray, professional trader and analyst, serves as video content editor for MoneyShow.com Video Network. He was originally trained as a biochemist but began using his computer expertise to analyze the financial markets in the early 1980s. Mr. Aspray has written widely on technical analysis and has given over 60 presentations around the world. Many of the technical indicators that Mr. Aspray wrote about in the 1980s, such as the MACD, have since gained worldwide acceptance.
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Tom Aspray, professional trader and analyst, serves as video content editor for MoneyShow.com Video Network. He was originally trained as a biochemist but began using his computer expertise to analyze the financial markets in the early 1980s. Mr. Aspray has written widely on technical analysis and has given over 60 presentations around the world. Many of the technical indicators that Mr. Aspray wrote about in the 1980s, such as the MACD, have since gained worldwide acceptance.
