Where Is The Stock Market Heading?

The second window down from the top is the McClellan Oscillator/VIX ratio. When this ratio gets above 12.50 (Friday’s reading was 13.19 and today’s 14.14) the market usually continues higher short term ( red dotted vertical arrows). This chart suggests higher prices short term. An ABC pattern may be in progress from the November 4 low where the “B” wave low was December 1.If “C” equals the length of “A” than a projection of 2300 level on the SPX is possible. If however the TRIN and TICKS reach over exuberance  levels showing exhaustion, we may exit our long position. For now we will hold our SPX position.

Here is a chart we are watching.Steep declines can occur when the McClellan Oscillator turns down before reaching +500 and the Stocks above 150 day average turns down before reaching above 70% (noted with blue arrows). As of today the NSYE McClellan Summation index stands at 345.06 and stocks above 150 day average came in at 66.24% and both in potential bearish levels. If market holds up and McClellan Oscillator exceeds +500 and Stocks above 150 day average exceeds 70% we will cover our “long term short position” that was established back on 1/13/16.For now we will remain short term bullish with our Long SPX on 11/30/16 at 2198.81. 

You can notice that the Bollinger Bands for GDX on just starting to “pinch” which also suggests an increase in volatility. Add to that the FOMC meeting tomorrow and Wednesday and this gold market could take a big swing this week. Though a short term swing is possible short term, we don’t think it will be the one to buy. The next retracement that breaks the November 14 low near 20 will be the one to watch for the bullish setup. Still neutral for now.