Stock Market Bounce

With the help of at least one MSM headline, the bounce looks to continue, as anticipated.  Clicking the graphic yields the bearish bullish story.

Here is how the S&P 500 closed yesterday, with a bullish looking flag settling down toward a visual support level that would be about a 50% retrace of the first up leg (again, this is a 60 min. view, not a daily, so everything’s compacted).  The potential is that a bottoming pattern is still forming.

As for the daily view, this drop is the April drop reincarnate.  There is no need to over think questions about whether it is a completed correction (if it could even be called that) or only the first shoe because what the SPX does when it gets to or even through the SMA 50 will tell the story.

If the market does top out after the rebound we continue to look at it as a much needed correction only, without the need to create headlines like the above because the downside would be trade-able, as would potential post-correction upside (barring the headline being right).  Potential targets were illustrated in NFTRH 303 using monthly charts.

SPX’ ultimate measurement is and has been 2192 but we will know soon if it is trying to get there all in one big gulp or if the typical mid 2nd term cycle is going to take effect and pave the way for final ramp, maybe through 2015.  This NFTRH chart was created about a year ago (+/-) and is a simple measurement.

Back in the short-term trenches, the VIX predictably has pulled back after investor angst got too heated.  Charting the VIX is remarkably unreliable so we’ll just note that it has settled to a support area and that it has a knack for crashing support areas.  Indeed, it would probably have to crash the MA 200 and get to the 12′s even for our best ‘bounce’ objectives to play out.

So there you have it; ill-fated bounce or something more?  I’ll lean toward bounce only, but it does not matter really.  We were talking about SPX 1950 to 1960 when the average bull was obsessing over Janet Yellen’s jawbone and what might come out of it next, with a side of geopolitical hysteria which, as noted then, is not a fundamental consideration.

The market will make its decisions as it always does, but the above hopefully paints in some perspective.