Monday, July 30, 2012

Monday Market Conditions 7/30/12 $SPX $SPY $VIX $VXX

After three large red candles to open the week, the S&P gained almost 50 points in Thursday & Friday's trading session.  This all comes on more QE3 hopes and the belief that Mario Draghi will back up his promise to save the euro.  Even if he does, the U.S. economy is still in trouble as higher taxes and federal spending cuts loom around the corner.

Looks like the upward momentum from last week didn't carry over into today, with the S&P failing to pick a direction.  This doji candle has formed at many of the short-term tops and bottoms from the last two months.  This could signal another move down in the coming days while we wait for the Fed statements.  The bearish divergences in the indicators still hold.  Higher highs in the market, lower highs in OBV and the stochastics.

The large move Friday and today's indecision weren't exactly mirrored in the volatility index.  Note how even though SPX gained ~25 points Friday, the VIX didn't even break the lows from 7/3.  Also see how it gained nearly 8% with the markets flat.  Watching the 20-day moving average as a mean-reversion indicator, you can see it is starting to curl back upwards.

The McClellan oscillator regained positive territory again last week after a short stint in the red.  Also interesting to note the divergence here.  As the market is making higher highs, NYMO is making lower ones.
The number of stocks trading above their 50-day moving averages is at its highest since March.

-After leading us higher, tech names have started to cool off.  And this is with Apple having a strong green day.  It would only be worse otherwise.
-Financials leveled off after taking a hit.
-The Energy risk-off train is moving right along.
-Materials still can't catch a bid.

-More risk-off with small caps getting hit.  Perhaps last week was everyone's chance to take profits?
-Utilities are also enjoying the money that comes with risk-averse investors.
-Industrials bounced slightly but appear to be ready for the next leg down.
-The sharp decline in the forward-looking Transports remains troublesome.

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