Yesterday I outlined that a first possible target for the INDU was the c=a extension at around $17,150. Today price hit $17,136 and reversed. At least we now know that was thus an appropriately assessed important price level and Fib-extension. Price also managed to get inside the (white) long term trend channel again; it needs to stay inside there for any further gains. But 2 swallows don’t make a summer yet…
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If we look at the S&P 500 we see that price once again found support at the 150d SMA, as well as the daily S1 level and lower BB. Will it be enough? Note the tightening BBs: a big move is coming soon. Unfortunately with the current sideways mess which easily can resolve 100p either way it’s hard to foretell which way it will be. For now, important levels held. (Text con’t below plot)
Another important indicator we need to watch is the VIX, as well as market breadth. We can see in the plot below that VIX has been making lower highs and its price highs have been contained by a descending trendline. VIX needs to break above this trendline in place since mid-October to gain more upside; which then in turn of course means downside for the markets.
Last but not least, market breadth did manage to end in positive territory today, albeit barely, but it favors the bulls as more stocks were advancing then declining today. Quite the change from yesterday, but similarly as Tuesday. Apparently, it seems therefore most appropriate to approach this -rather directionless- market on a day by day basis currently. Because one day you’re right and the next day wrong.
(Text cont’ below plot)
In conclusion; important and correctly identified support levels held today, while volatility remains unable to break out. Not until either happens, (break down in price and break out of VIX) will price remain in a side-ways (to up) mode. The daily BBs foretell a larger move is coming, and as usual, it will surprise the majority in its direction and strength, as that’s how the market works. Until then, expecting more side-ways (within a tight 1990-2065 band) seems to be the safest bet currently.