This SPX chart is flying high but it also left 2 gaps in its wake. I’m sure those two gaps will get filled, but I can’t give a time frame when they will get closed. Even the futures charts have gaps, so those two gaps will keep me in a long-term bearish mood. I made some position changes with the DJIA, but left them off the September peak, due to space limitations.
The Market Vane Report on the SP500 was pretty boring as they ranged between 53% and 55% bulls present. That is not even enough to get out of bed in the mornings for, as those readings are just middle of the road. If the big bearish picture is still in effect, then no new record highs should happen. The VIX has crashed acting inversely to the SPX, so in this case, the VIX is acting correctly.
I looked at all the peaks of the markets that I cover and there is a good case that can be made that the expanded flat was just a diagonal wave 3-4-5 in Minor degree. Sooner or later the markets will head in the direction it wants, but it should not soar to new record highs. Bullish moves this fast have nothing to do with fundamentals as it is more likely that the “Fear Of Missing Out” and buy stops getting hit is the main cause.
With a new location of the Cycle degree peak Wave 3, we would be starting a new set of impulse waves as well. There is no Market Vane Report for the DJIA but they do have the SP500 and the Nasdaq. Those reports are not at any extreme, and matter of fact is one of the most boring reports I have seen. Even the previous Market Vane Report was starting to get boring. Extreme readings is what I’m looking for, and I didn’t see any at this time.
Most commercial hedger readings were net short but I suspect they added to their long positions in the last few days. I will not find out until Friday nights reports are published.
I’m still bearish long term but in the short term, the markets can still go up!
With the stock market being bullish after the midterm elections, then technically the VIX should drop like a rock. It did drop like a rock but left an open gap in its wake. In the short term, the VIX could soar, closing off the gap but then resume another leg down. This leg down is just part of a correction which could end up being another zigzag as well. The stock bulls came out forecasting another huge move to the upside, but I don’t see it that way at this time. The VIX had its low in January 2018 at the $9 price level, so the VIX has been in a bull market since then.
The midterm elections went about as expected with the Republicans losing ground. It will definitely make it harder for President Trump to push through any agendas he has. In the end, if we relied on politics and fear to make investment decisions, then chances are good those decisions will not work out.