Stock Market Executive Summary

Stock Market Executive Summary

Last week, we had to do an update twice due to the location of price on the charts.     Here is the last statement we made during mid-week:

“In conclusion, we have a short bullish movement to the $VIX support and $ES resistance.   Once we get to these levels, we can forecast from that point on.”

The week ended positive.   This is now 2 weeks in a row.    Even though we closed positive, it really didn’t mean anything because we have not broken a major resistance value.     In fact, was interesting is that the $VIX closed at the support but the $ES never got to it’s resistance.    Now, the question is which one is really representing the market.    Let’s do a complete market analysis to determine what can possible happen next week.

Since beginning of 2015, the $VIX has been a leading indicator for the US Stock markets.    Below is the weekly chart for the $VIX provided by eSignal.

2016-02-21_222140vix_w

Price is right at the major support for the top zone.   For years, we have outlined two trading zones.    The top zone between 20.52 and 32.21 and the bottom zone between 20.52 and 12.77.  The top zone represents a bearish sentiment and the bottom zone represents a bullish sentiment.       As of right now, we are at the boundary condition where price can break the support and enter the bottom zone or it could bounce off the support and start to go back to the resistance.

Just examining this time frame, the probabilities are higher to break the support since price never touched the major resistance before coming back to this major support.   This is showing signs of price being strong bearish for the $VIX which would cause the markets to go up.

Let’s examine the Daily time frame to see if it confirms these probabilities.   Below is the daily time frame.

2016-02-21_222140vix_d

On the daily time frame, price is right at the boundary condition of the cloud.    The cloud is moving up so unless the $VIX drastically moves up tomorrow….it will automatically change to a bearish sentiment.  This will be the first time since Jan 5, 2016 that the sentiment will be bearish.   Can’t confirm the sentiment is bearish until price proves it can close below the cloud.

Let’s examine the $ES E-MIni SP500 futures and examine what is going on with that instrument. Below is the weekly chart.

2016-02-21_222140es_w

The weekly chart is bearish but it is consolidating now trying to get to the resistance, the top of the consolidation pattern.

Below is the daily chart.

2016-02-21_222140es_d

 

The daily chart is not really showing anything.     Price is trying to get to the bottom of the cloud but it could also pull back to the support.

Below is the 4h chart.

2016-02-21_222140es_4hr

 

The 4h chart is bullish being held by the support at 1902.00.   As long as this support holds, the probabilities will be high to reach the resistance at 1940.00

In conclusion, the $ES is telling us that the stock market can still go higher.    The only thing that can stop it is $VIX because it is at a support.

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EDUCATIONAL USE: Commodity Futures Trading Commission, Forex, Futures, Equity and Options Trading has large potential rewards, but also has large potential risk and may not be suitable for everyone. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you you cannot afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this document. The past performance of any Trading System or methodology is not necessarily indicative of future results. All information provided on the Blog is for educational purpose.

About the Author Manesh Patel