T2108 Update – A Break In The Fever Of A Sick Stock Market

T2108 Status: 14.1% (jumped from 8.3%)
T2107 Status: 15.3% (jumped from 11.5%)
VIX Status: 22.3 (confirmed failure at resistance)
General (Short-term) Trading Call: bullish
Active T2108 periods: Day #11 under 20%, Day #14 under 30%, Day #30 under 40%, Day #34 below 50%, Day #49 under 60%, Day #390 under 70%

Commentary

The fever inflicting the market is finally breaking. A full recovery will likely remain elusive for quite some time.

On January 22, 2015, the S&P 500 (SPY) jumped 1.4%, a small gain with a lot of meaning.

The S&P 500 (SPY) finally leaps out of its primary downtrend channel.

The NASDAQ has also managed to break its fever with a very clean breakout above the primary downtrend channel.

The charts above show an indices FINALLY breaking through a vicious downtrend channel defined by the two lower Bollinger Bands (BBs). For the entire month of January to-date the S&P 500 feverishly descended this channel. The sickness remains evident from the ferocity of the breakdown from the 50 and 200DMAs. Moreover, all three major moving averages are now in full downtrends – the 20, 50, and 200DMAs.

The immediate fever first subsided as sellers exhausted themselves taking the index far below its lower-BB. As buyers took the index back to a near full recovery on the day, the volatility index (the VIX) also topped out. At that time, I concluded the following:

“I REALLY want to believe that the VIX’s on-going failure to sustain itself above the intraday high from 2012 is sign that firm resistance is building at that level. Such resistance would add more credence to the formation of a bottom…

In the last T2108 Update, I noted that I was content to wait for the VIX to surge well above its upper-BB before making any further trades. I decided today’s move qualified.”

The VIX is now in rapid descent.

The volatility index, the VIX, has erased at least half of its recent breakout.

The sickness remains as long as the VIX is trending upward. All major trendlines are pointing upward – the 20, 50, and 200DMAs. Let’s see whether the Federal Reserve can this week work its typical magic and apply its special pressure on those uptrends.