There’s only one thing holding me back from signaling the ‘all clear’ 5 points away from the year-to-date high in the S&P500: the Russell 2000. The Russell 2000 as measured by IWM has been the strongest index year-to-date, returning over 8%. While the S&P500 has regained all of its losses from last Monday’s drop the Russell has yet to do so. Watch for a move above 920 in the Russell 2000 or $91.50 in IWM to signal 1,550′s are on the way in SPX.
- GOOG sets the tone — A new all time high in GOOG helped QQQ do something it has rarely done this year
- Above 1,525 — SPX closed a hair above 1,525 and saw momentum into the close
- Volatility implodes — The VIX has fallen 26% since 2/25
If you simply followed my simple outline from last night on GOOG & AMZN then you probably had a really good today. GOOG traded heavy volume within the first 6 minutes and was testing $808′s signaling it had the potential to bust a big move and boy did it ever, closing around $822. GOOG has undoubtedly replaced AAPL has the barometer in tech so keep watching its price action closely. Typically GOOG tends to pullback after making a new all time high but an ability to hold $810-$815 will have GOOG looking extremely healthy and set up a move into the $830′s within the next 5 trading days. On the back of GOOG, QQQ was able to achieve back-to-back green closes above $67 for only the 3rd time this year.
We closed above 1,525 which means SPX is officially more than 1/2 way to 1,550 which is home to peak call interest above 1,500 (based on March 16th expiration). Moreover, today saw the most volume on the 1,550 strike call in the last 5 days, outpacing the previous average 4 days volume by over 100%. Clearly this is a sign to me that traders are starting to position for a move to 1,550 ahead of March 16th expiration. The key now is turning the 1,520 level into support since it has been a price point with SPX has struggled.
I like to consider myself somewhat of a VIX connoisseur and based on my “expertise” the recent action in the VIX should be considered pretty bullish.
“Current levels on up to 1,505 is resistance overhead. If we do trade up beyond 1,505 it will have to be with the VIX also falling back near 15 in order to have me believing a bottom is in.”
-Stockhaven’s Market Take 2/26/13
Well after the VIX fell below 15 it never sustained back-to-back green closes above it so using that as a bottom signal proved to be spot on. VIX confirmations are always going to have you missing the actual bottom itself because the idea is you wait to see if it is confirmed, but you’ve still caught a good chunk of this move if you’ve simply taken the VIX”s cues. The bullish set up to me here is that the VIX is still 15% away from its year-to-date low while SPX is only 1/3rd away from its year-to-date high. In other words, volatility still has room to erode lower which should aid in a breakout of 1,530. There is no reason for the VIX to regain the 15 level at this point and I would be cautious if that happened.
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