Today we're going to take a close look at:
1. The SPX 2. The rigged $VIX 3. Market complacency, and sentiment, indicators (very important).
Looking at the SPX - I'm not sure if sub-minuette wave (((iv))) (marked iv) completed yesterday (Wednesday), or not, but I'm seeing futures up this morning.
SPX - Target at the top of the smaller pattern looks like 2717. Short term support 2710. This rally is beginning to look very tired, and I remain bearish.
$VIX looks like it's trying to build a base around $9 (8.85) again, although we could see 8.60 by the weekend - on a capitulation Friday.
$VIX chart:
The monthly $VIX chart below shows how the powers that be are able to rig the market by hammering this fear gauge down every month, or is this simply complacency on a grande scale, with the $VIX currently trading below the 2006 - 2007 lows. Either way, a day of reckoning is coming - I believe - some time in 2018. That vague of a timeline is going to upset some bears, but until fear returns to markets, you got nothing. Be patient, the bears will have their day, soon enough.
Regardless of the short term $VIX targets (above) we could see $VIX 7.85 by summer, and key $VIX resistance is a pathetic 10.95 (the 50 week ma on the VIX). I'm holding that long term $VIX chart close to my chest, but I can assure you, that is the number to watch!
You're probably asking what does this all mean? It means complacent, overbought, markets, tend to stay that way for quite a long time, and roll over very slowly. I also means that until the $VIX breaks out above that magic number, the bears are going to remain frustrated...
Market sentiment is off the chart!
Firstly - There are only a few sentiment indicators I trust, and the $BPSPX is one of them. I don't need a chart to tell you it's in my red zone (above) 80. Hasn't been this high since 2014. May press a couple points higher still, but this is a big red flag, that points to way too much bullishness.
You've seen people I follow, or who follow me (on twitter), talking about how, "sentiment was off the chart", months ago, and me shooting holes in their narrative... because most folks are using lousy indicators, or using someone Else's lousy indicators, and haven't a clue, what the hell they're talking about, most the time. This is what you find on the information freeway, a lot of road kill. That is to say, most investors would rather hear what their itching ears want to hear, rather than do their own home work. It irritates me to see disinformation, re-tweeted, even once!
One final note on sentiment extremes: Once everyone is fully invested, there's only one thing to do, and that's take profits. In other words, once everyone it bullish, there are no more buyers. Same thing goes for bearish sentiment, like we saw in 2008. Everyone (speaking of herd mentality) is wrong, most the time. The good news is once you're able to recognize extremes in sentiment, it helps you identify the capitulation points, that coincide with major reversals.
Other trades to look at:
$Oil - very bearish
Keep selling the top of the channel in Oil, until you hit pay-dirt, and I'm talking like 7 - 10% on your short bet. Support on the WTI is $55.
Sell Emerging markets:
Continue to sell the top of the pattern on the $RUT, as long as it's continues to struggle... This doesn't point to a "risk off" market! If the Russell happens to open above the 1555 level, that's going to become your stop hunt. I'll update this chart on my twitter @3Xtraders
If you have a higher risk tolerance, continue to sell silver, and or NatGas.
And one more thing about the rigged markets: There's a ton of money sitting on the sidelines. See the money flow out, while this thinly traded market was rigged higher, on the chart below. Once we see a correction; "beware the short squeeze".
Take care, Traders
AA
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