US Stock Market Update: Going lower or higher?

US Stock Market Update:  Going lower or higher?   Since Friday, volatility has come into the market and a lot of people are getting scared with the market pull backs.   Are they justified in worrying or this a healthy pull back.    Let’s examine the charts to determine what is going on.

Over 2 years now, we have been using the $VIX Volatility Index to forecast the market.   The $VIX is an inverse relationship with the US Stock markets.  In another words, if the $VIX goes up, the markets go down and vice verse.

Below is a 1 hour chart of the $VIX provided by Thinkorswim from TDAmeritrade.    Since July 8, 2016 until Sept 9, 2016, we have been consolidating in a range between 14.77 and 11.45.   Sept 9, 2016, we closed above this range which indicated that the markets have broken out of the consolidation pattern.   Since the resistance was broken, this indicated that the markets were going to go down which did occur.

2016-09-13_090349_vix_1h

Yesterday, we retested this resistance we had broken as a support at 14.77 and held.    Even though the markets closed higher yesterday, this was a bearish sign since we could not close back below the 14.77 support.      The next resistance is 15.45 and then 17.18.      Until we close below 14.77, the markets can go lower.

The 1 hour time frame is the controlling time frame for the $VIX right now.

Below is the 1 hour chart for the $ES Emini SP500 from Thinkorswim.  The 1 hour time frame is the controlling time frame for the $ES right now.    The current support is 2128.04 and current resistance is 2152.55.    The higher time frame supports are 2116.00 and 2099.50.

2016-09-13_090155_es

NOTE:   This week will be very “crazy” due to end of quarter and also option expiration.   Be ready for a lot of volatility.

 

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About the Author Manesh Patel