Premarkets were up +0.30% suggesting a strong opening this morning in the absence of any strong financial news.
Markets Opened and quickly marched upwards to +0.50%, but on low to moderate volume. By 10 am the averages had stalled, volume was falling and the $VIX fell to the high 11’s. Investors continued to be worried about further market gains as the averages continue to consolidate in sideways trading.
Complacency is one of the greatest fears of a bull market and has in the past signaled a coming correction.
VIX Slammed To 2014 Lows
In a greatly ironic moment for capital markets, minutes ahead of the Fed’s Bill Dudley speaking about “low volatility in markets is a cause for concerns, indicates complacency” . . .
[The] VIX just collapsed in a pile of “we don’t need no stinking protection” volatility selling to its lowest level since December 2013 and almost its lowest since April 2013 recovery lows.
The short term indicators are leaning towards the hold side at the opening. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. The important DMA’s, volume and a host of other studies have not turned and that is not enough for me to start shorting. The SP500MACD has turned flat, but remains above zero at 4.37. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 8 %buy. (Not so bullish this morning.) Investing.com members’ sentiments are 65 %bearish.
In looking at the 50 DMA, the current SP500 opened above that line and the small caps remain at the 145 DMA. I can not see, as of right now where those large cap MA’s are rolling over to indicate any permanent bear run but the falling small caps are a real worry. (See deviation of large and small caps here.)The NASDAQ 100 DMA has crossed over the 145 DMA and the small cap trend is consolidating sideways and the $RUT is below the 200 DMA.
Bottom line here is that I have not seen any serious bears jumping out of the woods just yet, although I am VERY concerned that ANY minor correction could turn nasty in a heart beat. One significant signal would be losses in any of the major averages that go over the ‘magic’ 3 % and then you need to pay close attention to risk-off tactics. Any market correction over 6% would be an additional signal and I can’t see having one without the other.
