There May Be A Big Storm Brewing In The Stock Market

Ping-Pong?

Stocks continue to bounce around on May 21, this time they went up. It has become a bit of a ping pong game. It would seem that when the markets rise, the Trump administration gets tough on China, and when markets fall, they ease up on China. It is almost as if the President is playing a game of price discovery to see which topics the market cares the most about. If there is no market reaction, the President has the green light to continue the course of action. If the market falls, he reverses policy and moves on to the next topic.

Love it or hate it, that is how it feels to me.

There May Be A Big Storm Brewing In The Stock Market

Stock Market for May 21 – A Storm Brewing?

S&P 500 (SPY)

Overall the cross-currents for the stock market are strong, and we are entering a significant period. We can see we have two trend lines that are due to cross path on May 23. A rising trend line and falling trend line.

What does that mean? Well, it is kind of like a when a low-pressure weather system and high-pressure system come together you get a storm. Which way will the wind blow?

(Click on image to enlarge)

S&P 500, SPX

We can see that both the uptrend and downtrend have offered levels of support and resistance. Meanwhile, the RSI is trying to trend higher, on the four-hour chart, breaking its downtrend. It would suggest to me the S&P 500 is likely to rise above its downtrend, helping to push the S&P 500 on to its next leg higher in the coming day or two towards 2,915.

What could be the catalyst? Well, lost in all the trade noise, you do get the Fed minutes tomorrow at 2 PM. It could give investors some good insight into what the Fed is thinking about regarding the future of interest rate policy.

VIX

The VIX index fell below 15, and that is another positive sign that equities are likely to continue to rise. As traders short vol and go long the S&P 500.

(Click on image to enlarge)

vix, vol

Russell 2000 (IWM)

Well, yesterday we were talking about the chance for the Russell to retest its April break out, and to this point that hasn’t happened. However, the one thing to consider is that the index did get to within about 10 points of that trend line on May 13. Is that close enough? It could be.

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Disclosure: Michael Kramer and the clients of Mott Capital own Apple

Disclaimer: This article is my opinion and expresses my views. Those views can change at a moment's notice when the market ...

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