Weekly Market Outlook – Stuck In The Middle With You

S&P 500 Weekly Chart, with Volume

Source: TradeStation

You can also see on the weekly chart the VIX is miles away from a peak level that tends to coincide with market bottoms.

It's a conundrum. Though there are decent bullish and bearish arguments to be made, the big driving force right now is sentiment, which is ultimately driven by politics. The right news on the right day can send stocks soaring, while the wrong news on the wrong day could prove devastating. We could use conventional interpretation of charts to glean some sort of picture about what's in store, but it would be of little value.They're even of less value as long as the index is trapped between all of its key moving averages.

What we're really watching right now is the VIX, and volume, as the simple look at the indices can be somewhat deceptive.

If the VIX pushes above the ceiling at 18.0 and the S&P 500 moves to lower lows, that's trouble... though bear in mind the convergence of the 50-day and 100-day moving average lines at 2674 could turn into at least temporary support.

And, if the market starts to lose ground on rising volume - something we've somewhat seen, but not seen in earnest - that too is trouble. On the flipside, if bullish volume starts to flow again (something we've definitely NOT seen of late) and the S&P 500 can push its way back above the 20-day and 200-day moving average lines, that's a buy signal too. The NYSE's up-volume and down-volume data on the bottom portion of the chart below illustrates how and why it was only a matter of time before the rug got pulled out from underneath the market last week.

S&P 500 Daily Chart with NYSE Up, Down Volume

Source: TradeNavigator

The hardest part is the waiting, for one side or the other to flinch. But, waiting is the smart-money move here.

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