Market Analysis

Weekend Charts: Quo Vadis?

Quo VadisIf you haven’t read the letters by Seneca the Younger I highly recommend you find a copy and do. Amazing writing that highlights key philosophical thoughts on life, death and society by one of the key eye witnesses of Roman history at a time when Rome was going through major turmoil. Seneca was an advisor to both Caligula and Nero and ultimately got caught up in Nero’s paranoia and was forced to commit suicide. What’s so fascinating about his writings is that Seneca was clearly a highly intelligent human being and he gives you reflections of a time when many in the Roman Empire surely were wondering where it was heading. Quo Vadis? Where are you going? And that’s the question that one can’t help but ponder in today’s time as well, not only in regards to this market but also in regards to society as a whole.

My latest thoughts on the market are outlined in Friday’s market update. Yet Friday’s close makes the state of markets ever more curious. Not only are we not going anywhere it seems we are really NOT going ANYWHERE as we are now also apparently closing at the same price level every week. You may rightly wonder what the statistical probability is that the world’s largest, supposedly free and not manipulated equity market closes at virtually the same level three weeks in a row. I don’t have the slightest idea what the math would show, but it is getting quite silly. Friday saw markets stay in the red for most of day, but magic buy programs near the close (as in the previous Friday) ensured that the $SPX closed the week exactly flat:

SPX 15 min

Fans of the $ES ghost contests may certainly have a field day with this chart.

Quo Vadis of course not only applies to equity markets. The latest explosion of unprecedented debt is found in student loans and one has to wonder how people making less are supposed to pay back the exponential increase in debt they are taking on to even have a shot at getting a decently paying job:

But this is the system we have and not the one we want. And in the same context we need to trade the market we have not the one we want. What do charts tell us this weekend?

$SPX daily: The 50MA remains a key bounce/’save’ zone. One could make the argument that the more often this line of support gets hit the weaker it gets. In fact, the slope of the 50MA is not exactly inspiring which is of course reflective of the fact that the $SPX hasn’t moved since early March. Multiple unfilled gaps below with confluence of the 100MA and 200MAs near these unfilled gaps continue to make an eventual re-connect likely:

SPX daily

$SPX Weekly: Failed break-outs and a negative MACD divergence notwithstanding nothing has cracked and this seemingly never-ending upward trend largely explains the complacency in the $VIX: Why freak out when all is steady as she goes:

SPX weekly

$VIX weekly: Speaking of the $VIX, hammered again into a 12 handle just in time for our weekly close of $188 $SPY the $VIX is at a low point in similar fashion as it is every May it seems just before it blasts off. The next step seems rather binary: See the weekly $SPX trend line break and the $VIX explodes higher, it’s really that simple:

VIX weekly

Many of the other key indices are signaling that such a shift could occur in a heartbeat if actual sell volume appears. So far it hasn’t but the charts below indicate how fragile the current set-up is:

$RUT daily: This week the $RUT’s February low acted, not surprisingly, as a bounce zone. A break below it and a move into the mid 900s cannot to be excluded as a key technical target:


$QQQ weekly: Improvement in the weekly MACD gives hope for a larger coming bounce in tech, yet the chart also has a bear flag feel to it all. A break lower out of the flag and the weekly 50MA makes for a potential target:

QQQ weekly

The $XLU continues to follow the pattern of 2013 which projects for significant more downside to come if the pattern holds true. A bounce/consolidation week is in the offing and this week will show whether last week was the consolidation week and we head lower quickly or whether we see a bounce now:


But fear not central banks are active, eager and I would argue, desperate, to keep the mirage going. The ECB is signaling every which way that they will want to employ multiple measures at their June meeting to push the record level #DAX to even higher prices under the auspice of needing to see growth. Never mind that these same policies have failed to produce organic growth in the US, but Janet Yellen has already made clear that she will never leave. In her wisdom maybe she can comfort students wondering how they will ever pay back their student loan debt by telling them not to worry as there is no inflation. Isn’t that right Janet Yellen? Quo Vadis?

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