Wednesday, January 21, 2015

Stock Market Update

Based on my most recent post mentioning US stocks and the elevated VIX/VXV ratio, the 1-16-15 reversal was a potentially significant bottom reversal.  Given the overall bullish trend, it would make sense to be long with a stop below the Jan 16th low.  However, given the position of elevated volatility and a multiday attempted rally so far, a break below the Jan 16th low may lead to significant continuation to the downside.

Click on Chart to Enlarge

This chart of QQQ has the general appearance of a descending triangle, which most often is a bearish chart pattern, but not confirmed until a close below the lower boundary line.

There is a downward tilt to the pattern that makes it possibly a falling wedge, which is typically a bullish pattern in an uptrend.  So the key here from a charting perspective is whether the top boundary or bottom boundary trendline is broken on a closing basis.  The assumption at that point will be that the trend will continue towards the next support or resistance area.  In this case that would be the all time highs as resistance, and the October lows as support.

Pete

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