Thursday, April 7th, 2016

Stock Market report

Here is a chart of $SPX  with trend lines drawn. As you can see this is a falling wedge pattern which is usually a bearish pattern. But the lower trend line is rising sharply and so is the price, making higher highs and higher lows. The momentum is clearly to the upside. Simply, more buyers are bidding up the prices compared to sellers.

SPX chart

Looking at the top of the chart above, you can see a long trend line that is drawn from the October 2007 highs. This trend line is yet to be broken by the current price. Technically we are still in a downward trend , however moving up. If the price momentum pierces through this trend line from left to right we should be on a clear cut path of a bull market. Lately there has been one attempt, and it never succeeded.

NDX Chart

However the case is different when we look at NDX charts. The long term trend line drawn from October 2007 is clearly broken and the price is above it. That is why NDX has performed better than SPX in the current rally. Major stocks like AAPL, GOOG, BIDU and others have been performing better in the technology sector.

VIX Chart

Another important chart to look at is VIX which has been in a clear cut downtrend and as the indexes keep making new highs VIX should follow this downward trend line or may flatten out. However there are sharp spikes in in the VIX only when the market sells off or dips between advances.

I believe, in due time bulls will manage to break the upper trend line on SPX and make a clear cut case of a new bull market. Fundamental  changes, the economic recovery, reduced job losses, rise in new home sales figures, and above all rise in consumer confidence index will propel the market higher as it is doing now. There is a constant chatter that the recession is over, and the negative sentiment is fading out.


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