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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

VIX Shorts Being Squeezed While SPX Prepares for Another Decline

Stock-Markets / Stock Markets 2015 Aug 26, 2015 - 06:23 PM GMT

By: Anthony_Cherniawski

Stock-Markets

Today’s SPX managed to stay in the black, but it’s a Pivot day. This bounce is not a good omen for the market for that reason and the fact that it remains under the hourly Cycle Bottom resistance at 1923.36.

It gives us confirmation of the Wave structure illustrated on the chart. A Wave [iii] would continue to stay under Cycle Bottom resistance, while Wave [iv] may venture inside and Wave [v] ride above the Cycle Bottom until completion.


The hardest thing to do in these big swings is to stay short. The wide swings stir up the “fight or flight” emotions in us. But these wide swings are also what tears the market up.

The next move may be quite substantial, so stay short for the time being. We may see one or more market-wide closures as we are seeing individual company trading halts at this time.

The VIX appears to be hovering, waiting for it Pivot (today). This could send the VIX to new highs.

Meanwhile, VIX ETF shorts are being squeezed for the third day. This will allow VXX and the other ETFs their breakout above Monday’s high.

The NYSE Hi-Lo Index put in a lower high this morning and is back beneath its 50-day Moving Average again. This is due to indiscriminate ES and E-Mini purchases in the Premarket futures. Please note that this does not suggest an improvement in the Hi-Lo, since at best there were still 15 new 52-week lows on the NYSE today.

I expect to see a real washout in the Hi-Lo Index when this decline is done.

TNX is rising in a corrective pattern that appears to be over. If so, liquidity will be flowing back into Treasuries, causing yields to sink like a rock. Ending diagonals are tough to analyse because they are often disorderly and stretch the rules.

MUT is also caught in an inside formation. The direction of the break will determine the final outcome. However, we have a chart pattern (not shown) that indicates a much larger decline to come.

Regards,

Tony

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Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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