AT40 = 49.0% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 50.1% of stocks are trading above their respective 200DMAs
VIX = 15.8
Short-term Trading Call: bullish


Another proclamation on monetary policy from the Federal Reserve is just 3 trading days away. Hanging in the balance is the S&P 500 (SPY) as it precariously clings to support at its 50-day moving average (DMA). The Nasdaq and the PowerShares QQQ ETF (QQQ) are barely clinging to the bottom of their respective uptrend channels defined by their upper-Bollinger Bands (BBs).

The S&P 500 (SPY) limps into this trading week after just barely avoiding a 5th day in a row of selling that closed the index on top of its 50DMA support for the 3rd day in a row.

The Nasdaq started last week at a new all-time high and slid into Friday barely clinging to its short-term primary uptrend.

Like the Nasdaq, the PowerShares QQQ ETF (QQQ), spent most of the previous week cooling off from the last all-time high and barely clinging to the bottom of its upper-Bollinger Band channel.

With the iShares Russell 2000 ETF (IWM) gaining 0.5% on Friday, my favorite technical indicator, AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, reversed most of its loss for the week. At 49%, AT40 is just under the 50.5% it achieved when the Nasdaq and QQQ made new all-time highs, and the S&P 500 broke out convincingly above its 50DMA resistance. At that time, I thought the stock market had returned to its “originally scheduled programming.” Instead, the channel switched right away.

Surprisingly, the volatility index, the VIX, is not reflecting an increase in anxiety even though the major indices performed poorly through most of the week. The 15.35 pivot acted as a powerful gravitational force. If the Federal Reserve works its calming magic this week, the VIX should even plunge below the pivot. I will be looking to add to my latest volatility fade on any increase in the VIX going into the Fed meeting.

Print Friendly, PDF & Email