Price Headley's Daily Trend Watch
Enviado: 12/12/2002 12:18Price Headley's Daily Trend Watch
VIX Weekly Sell Signals
December 11, 2002
Stocks moved lower Wednesday, with the Dow down by 46.56 points points and the Nasdaq lower by 3.82 points. Kimberly Clark (KMB) warned today that fourth quarter earnings would actually fall, rather than climb as they had previously expected. MetLife (MET) upped its 2003 earnings forecast today, above analysts expectations, to nearly $2.80 per share.
Note in the chart below that when the VIX closes a week above the prior week's high, that is consider a sign that volatility is on the rise. This in turn suggests that declining stock prices are likely looking forward, as increasing fear means more selling pressure on individual stocks and the market as a whole. In contrast, when the VIX sees a weekly close below the prior week's low, then fear is likely to
diminish and the market should see more buyers. That occurred after the buy signal for the week ended October 18, coming the week after the market bottomed. That buy signal is now over according to the weekly VIX, and we look for lower prices in the coming weeks. One "fly in the ointment" to note is that the recent VIX sell signals had occurred when the S&P 100 Index (OEX) was trading below its 20-week simple moving average (shown in blue in the upper chart. With the OEX currently holding above this trendline, this makes the 450 level an important level to watch over the coming weeks. An OEX over 450 is a plus, while a break under 450 on a weekly closing basis would likely open the floodgates with new selling pressure.
WEEKLY VIX - 12/11/02
SUPPORT RESISTANCE
Nasdaq Composite 1375 1410
S&P 500 890 920
Dow Industrials 8475 8675
MARKET TIMING:
STOCKS: NEUTRAL (as of 08/30/02 close)
BONDS: BEARISH (as of 01/03/01 close)
GOLD: BULLISH (as of 12/20/99 close)
MARKET OUTLOOK:
The Standard and Poor?s 100 Index (OEX) managed to notch a close back above the very key 455-460-support/resistance zone, and in the process move further away from the very key 50dayEMA (457.67).
However, the shorter-term trend following indicator in the 10dayEMA (red) is bearing down on the market and keeping the bulls at bay.
As a result, the market is setting itself up for an interesting scenario, as price becomes constricted and volatility confined to likely produce a break down, or away in the near future.
>From a price technical level we?ll be looking for a break out above 465, or below 455 to suggest follow through to be likely. However, we must be careful of jumping the gun given the recent turn down in the average directional movement of the market, which suggests a choppy environment.
Therefore, there could be a fake-out.
For now we have no official bias on the market, but we must weigh the chances of follow through to the upside as a bit higher for two reasons. First, the VIX buckling under the key support/resistance band of 33-36 and second the key horizontal price support of 455-460 and the trend following support of the very key 50dayEMA (blue).
On the short side of the scale, we have negative momentum, trade below the 10dayEMA (red) and several recent bearish closes, not to mention the geopolitical issues of late and the IPO of Seagate Technologies opening below and never trading above its IPO price.
There?s both sides, with a minor tilt to the former, yet still meriting no official bias other than neutral at this point, as the short-term trend remains lower and the intermediate-term trend remains higher.
Daily Chart of OEX showing a market that?s getting squeezed between key support (blue) and key resistance (red)
From an economic perspective, we saw no key reports released today, while retail sales are due out Thursday, with PPI and Michigan Sentiment Friday.
Economic Overview
Indicators:
The RYDEX (Nova + OTC)/Ursa Ratio is estimated to have come in at 1.43 Wednesday following the 1.38 reading Tuesday following the 1.45 reading Monday. The ratio came very close to the key lower band at both Monday and Tuesday?s close yet failed to penetrate it on either occasion. As a result, with no official indication we must remain neutral based on this indicator. The lower band stands at 1.36, while the upper band is at 2.53.
Daily Chart of the Rydex (Nova+OTC)/Ursa Ratio
The CBOE Volatility Index (VIX) printed another move lower following through on the recent reversals to close near the lows and below the open. Wednesday was no different as volatility continues to trend lower, which suggests an equity market that should move higher in sympathy. However, we mentioned true confirmation of a new trend lower may only come with a break below the key bull/bear fulcrum of 30. We
expect to get a bounce from 30 back into 32.50, or so before getting a chance to break below. Note: we mistakenly put our unofficial bias as bearish (should?ve been bullish) in yesterday?s indication summation.
Daily Chart of the Volatility Index (VIX)
The CBOE equity put/call ratio (EPCR) was 61% Wednesday following the 71% Tuesday reading following the 58% Monday reading. The indicator remains in the neutral zone once again at Wednesday?s close, although we did see a spike above the key upper band during the first block of trade, which suggested fear was too extreme and likely to reverse and push the market higher, which it did. Nevertheless, the fear subsided by the close and moved back into the neutral zone. The lower band is at 0.40, while the upper band is at 0.83.
Daily Chart of the CBOE Equity Put/Call Ratio
Bottom Line:
The markets held true to the recent neutrality and its nasty byproduct, choppy. The market closed near its open with tails on both sides suggesting a draw after some bears lost then some bulls lost, with the only victor being neutrality. As a result, we remain neutral in this environment until we see a pronounced move with some solid
movement in a trending mode and preferably with volume support. As outlined above, we?ll be looking for a move out of the 455-465-zone in the OEX to suggest a potential continuation move out of this whipsaw market of late.
Indication Summation
VIX Weekly Sell Signals
December 11, 2002
Stocks moved lower Wednesday, with the Dow down by 46.56 points points and the Nasdaq lower by 3.82 points. Kimberly Clark (KMB) warned today that fourth quarter earnings would actually fall, rather than climb as they had previously expected. MetLife (MET) upped its 2003 earnings forecast today, above analysts expectations, to nearly $2.80 per share.
Note in the chart below that when the VIX closes a week above the prior week's high, that is consider a sign that volatility is on the rise. This in turn suggests that declining stock prices are likely looking forward, as increasing fear means more selling pressure on individual stocks and the market as a whole. In contrast, when the VIX sees a weekly close below the prior week's low, then fear is likely to
diminish and the market should see more buyers. That occurred after the buy signal for the week ended October 18, coming the week after the market bottomed. That buy signal is now over according to the weekly VIX, and we look for lower prices in the coming weeks. One "fly in the ointment" to note is that the recent VIX sell signals had occurred when the S&P 100 Index (OEX) was trading below its 20-week simple moving average (shown in blue in the upper chart. With the OEX currently holding above this trendline, this makes the 450 level an important level to watch over the coming weeks. An OEX over 450 is a plus, while a break under 450 on a weekly closing basis would likely open the floodgates with new selling pressure.
WEEKLY VIX - 12/11/02
SUPPORT RESISTANCE
Nasdaq Composite 1375 1410
S&P 500 890 920
Dow Industrials 8475 8675
MARKET TIMING:
STOCKS: NEUTRAL (as of 08/30/02 close)
BONDS: BEARISH (as of 01/03/01 close)
GOLD: BULLISH (as of 12/20/99 close)
MARKET OUTLOOK:
The Standard and Poor?s 100 Index (OEX) managed to notch a close back above the very key 455-460-support/resistance zone, and in the process move further away from the very key 50dayEMA (457.67).
However, the shorter-term trend following indicator in the 10dayEMA (red) is bearing down on the market and keeping the bulls at bay.
As a result, the market is setting itself up for an interesting scenario, as price becomes constricted and volatility confined to likely produce a break down, or away in the near future.
>From a price technical level we?ll be looking for a break out above 465, or below 455 to suggest follow through to be likely. However, we must be careful of jumping the gun given the recent turn down in the average directional movement of the market, which suggests a choppy environment.
Therefore, there could be a fake-out.
For now we have no official bias on the market, but we must weigh the chances of follow through to the upside as a bit higher for two reasons. First, the VIX buckling under the key support/resistance band of 33-36 and second the key horizontal price support of 455-460 and the trend following support of the very key 50dayEMA (blue).
On the short side of the scale, we have negative momentum, trade below the 10dayEMA (red) and several recent bearish closes, not to mention the geopolitical issues of late and the IPO of Seagate Technologies opening below and never trading above its IPO price.
There?s both sides, with a minor tilt to the former, yet still meriting no official bias other than neutral at this point, as the short-term trend remains lower and the intermediate-term trend remains higher.
Daily Chart of OEX showing a market that?s getting squeezed between key support (blue) and key resistance (red)
From an economic perspective, we saw no key reports released today, while retail sales are due out Thursday, with PPI and Michigan Sentiment Friday.
Economic Overview
Indicators:
The RYDEX (Nova + OTC)/Ursa Ratio is estimated to have come in at 1.43 Wednesday following the 1.38 reading Tuesday following the 1.45 reading Monday. The ratio came very close to the key lower band at both Monday and Tuesday?s close yet failed to penetrate it on either occasion. As a result, with no official indication we must remain neutral based on this indicator. The lower band stands at 1.36, while the upper band is at 2.53.
Daily Chart of the Rydex (Nova+OTC)/Ursa Ratio
The CBOE Volatility Index (VIX) printed another move lower following through on the recent reversals to close near the lows and below the open. Wednesday was no different as volatility continues to trend lower, which suggests an equity market that should move higher in sympathy. However, we mentioned true confirmation of a new trend lower may only come with a break below the key bull/bear fulcrum of 30. We
expect to get a bounce from 30 back into 32.50, or so before getting a chance to break below. Note: we mistakenly put our unofficial bias as bearish (should?ve been bullish) in yesterday?s indication summation.
Daily Chart of the Volatility Index (VIX)
The CBOE equity put/call ratio (EPCR) was 61% Wednesday following the 71% Tuesday reading following the 58% Monday reading. The indicator remains in the neutral zone once again at Wednesday?s close, although we did see a spike above the key upper band during the first block of trade, which suggested fear was too extreme and likely to reverse and push the market higher, which it did. Nevertheless, the fear subsided by the close and moved back into the neutral zone. The lower band is at 0.40, while the upper band is at 0.83.
Daily Chart of the CBOE Equity Put/Call Ratio
Bottom Line:
The markets held true to the recent neutrality and its nasty byproduct, choppy. The market closed near its open with tails on both sides suggesting a draw after some bears lost then some bulls lost, with the only victor being neutrality. As a result, we remain neutral in this environment until we see a pronounced move with some solid
movement in a trending mode and preferably with volume support. As outlined above, we?ll be looking for a move out of the 455-465-zone in the OEX to suggest a potential continuation move out of this whipsaw market of late.
Indication Summation