Of course, the 200 refers to the 200-day Moving Average of the S&P 500 Index. While it did not offer, much resistance on the way up, it did provide support on Friday. Details along with an updated chart follow in the Market Review along with an update for last week's VanEck Vectors Gold Miners ETF (GDX) idea.

S&P 500 Index (SPX) 3044.31 added another 88.85 points or +3.01% last week with a gap up open last Tuesday closing well above the previous restraining range. After closing above the 200-day Moving Average on Wednesday and Thursday, it tested support on Friday and then closed higher. The 200-day Moving Average closed Friday at 3001.90.

The 3-23 low at 2192 designated (3) for an Elliott 3 wave on the impulse decline. While it's hard to dispute the 3 wave count down, the anticipated 4 wave remains undefined since the rebound from the low has already exceeded the 62% Fibonacci retracement level, and using the operative upward sloping trendline, USTL as a guide, SPX shows no sign of slowing.

Elliott waves are less predictive than reflective as the waves often recount as new data arrives. For example, wave 4s can become extended wave 3s and wave 5s may become new 3 waves. However, due to the suddenness and magnitude of the decline it's hard to dispute the count of the current wave 3 down.

CBOE Volatility Index® (VIX) 27.51 declined .65 points or -2.31% last week. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, declined 1.08 points or -4.54%, ending at 22.72%.

The spike up to 77.15% on Monday, March 16, the day SPX declined 324.89 points, likely marks the top for this market decline.

VIX Futures Premium

This next chart shows as our calculation of Larry McMillan’s day-weighted average between the first and second-month futures contracts as of last Friday.

With 12 trading days until June expiration, the day-weighted premium between June and July allocated 60% to June and 40% to July for a premium of 6.73%, stuck in the yellow caution zone between zero and 10% vs.7.76% for the week ending May 22, but trending upward.

The premium measures the amount that futures currently trade above or below the cash VIX, (contango or backwardation) until front month futures contract converges with the VIX at the next monthly futures expiration on Wednesday, June 17.

The relationship of the futures curve to the VIX, as measured by the premium, makes a good real-time sentiment indicator based upon actual commitments of large Asset Managers and Leveraged Funds.

For daily updates, follow our end-of-day volume weighted premium version located about halfway down the home page in the Options Data Analysis section on our website.

VanEck Vectors Gold Miners ETF (GDX) 34.32 down 1.23 points or -3.46% for the week. Last Tuesday it declined 1.34 points closing right above the SU (stop/unwind) for last week's trade plan deferring action. The wait was short since on Wednesday it made a reversal, and then on Thursday turned higher again.

On Friday's close the long July 17 37/40 call spread (long 1 July 17 37 call and short 1 July 17 40 call) detailed in Digest Issue 21 "New Upward Sloping Trendline [Charts]" was priced at .62 compared to .91 the week before.

Uncertainty in what may become known as the year of the Black Swans, along with underlying fundamentals supporting gold prices such as the rescue packages from the Treasury and the Fed's new "QE - Unlimited" actions, the time seems right to add some gold exposure as portfolio protection.

Crude Oil

One more thing before signing off, WTI crude oil at 35.49 basis July futures gained 2.24 points or +6.74%, last week. The large recent decline in futures open interest suggests shorts are covering while a potential Head & Shoulders bottom pattern implies it may continue up to fill the gap between 38 and 42 and then reach the measuring objective at 50. Worth considering, as more production cuts meet expanding demand as the global economy begins to recover.

Strategy

As long as the S&P 500 Index remains above its operative upward sloping trendline stay with (go with ) the bulls despite all the valuation rotation chatter as the big cap NASDAQ stocks are in charge.

In addition, consider the VanEck Vectors Gold Miners ETF (GDX) for some downside protection and start looking at crude oil and the energy sector again.

Summary

Last Tuesday's S&P 500 Index gap up opening followed by closes above the 200-day Moving Average on Wednesday, Thursday, and Friday confirm last week's bullish momentum. Further support appears likely from the gold miners and perhaps even crude oil and the Energy sector.