Market Conditions 6/19/12 $SPX $SPY $VXX $VIX

To close last week, rumors of QE3 continued to swirl, causing us to rally hard and close at the highs of the day.  Yesterday was a tug-of-war between those disappointed by the weekend's Greek elections and those convinced the Fed is going to announce more easing come tomorrow.  Should anything less than QE3 be announced, I feel we sell off.  How hard remains to be seen.

In my less-than-expert opinion, I would be surprised to see another round of QE - at least for right now.  What I am expecting is possibly more Operations Twist.  The reason is that full-blown QE3 just has too many far-reaching implications for the overall economy, and not necessarily all good.  Not the least of which being that it starts us down the road of QE-ad nauseum, which is a scary thought.

Technically, the S&P 500 finally regained the 50-day sma in today's session, but faded late in the day.  Yesterday we closed back above the 1340 battle line, and today fought with 1360.  The 50% retracement off the Apr high has come and gone, with 61.8% landing at, lo and behold, 1362.  Beware that these last two weeks have could be seen as a bear flag continuation pattern with slightly decreasing volume, possibly indicating a further move down.

The Volatility Index (VIX), which also serves as a measure of market fear, dropped over 13% in yesterday's session, way below the supporting trend line.  Even with the market up almost a full percent, the VIX actually closed green.  This shows to me that smart money is hedging their bets regarding the recent bullishness into tomorrow.

Volatility futures continued to sell off, breaking the neckline of the slanted head and shoulders.  Also note that it is closing in on the lows of the year.

The McClellan Oscillator (NYMO) closed at +83, well over the highs of the year.  To me this is big-time overextended.  This move is just too far, too fast and in order to start another leg up, we'll need to work this off for a few days first.

The percent of stocks above their 50-day moving average (NYA50R) is almost back to 50, and closed the descending trend line, also quickly headed for overbought.

Technology is still churning, basically keeping pace with the overall market.  Setting up for a potentially large move one way or another when it happens.
Financials are clawing their way back, which is what you want to see for a true bull market.
Energy and materials continue their inability to find buyers, only further supporting my thesis of world economies slowing.