U.S. equities – downtrend arrested?
Posted By Prieur du Plessis On November 29, 2011 @ 11:30 am In Investment,Stocks | 2 Comments
My notes below are somewhat cryptic as I am about to leave for abroad. However, the graphs should provide some food for thought regarding the short-term outlook for U.S. stocks.
Yesterday’s rally in the S&P 500 was mainly as a result of the PE10 closing the discount that opened the VIX last week.
[1]
The rally took the PE10 to 19.95 from 19.39 last Friday.
[2]
The PE10 remains under the 40-day moving average, with the latter topping out. I will not be surprised to see the 40-day moving average tested at 20.40 soon.
[3]
The PE10 is oversold but the RSI is still trending down. An unchanged to higher closing of the S&P 500 over the next three days is likely to break the RSI downtrend.
[4]
Both the 12-day and 26-day exponential moving averages of the PE10 are bottoming.
[5]
The MACD (26;12) of the PE10 is showing signs of bottoming. The nine-day moving average of the MACD is still trending down while the gap between it and the MACD indicates that a longer-term buying signal is still some way off.
[6]
The VIX is testing support levels around 32.
[7]
The RSI of the VIX has retreated somewhat from mildly overbought conditions but remains above the downtrend established in August.
[8]
The VIX is currently testing the 12-day and 26-day exponential moving averages.
[9]
The MACD (26;12) is slowly rolling over and the gap to its nine-day moving average(VIX Signal) is closing slightly.
[10]
The VIX MACD and the signal are a better indicator of PE trend changes than those of the PE10. The closing of theVIX’s MACD and the signal indicates that a buy signal could be imminent.
[11]
The RSI of the PE10 and the VIX (inverse) combined has tested the range of previous oversold levels. Although the RSI is still trending downwards, unchanged S&P 500 and VIX levels over the next three days will break the downtrend.
[12]
A break in the downtrend of the combined RSI is likely to lead to a significant rally in the S&P 500.
[13]
Source: CBOE; I-Net Bridge; Plexus Asset Management.
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[14] Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.: http://www.feedburner.com/fb/a/emailverifySubmit?feedId=921608&loc=en_US
[15] (What's this?): http://www.wikinvest.com/blogger/wikinvest_wire
[16] Why We May See a Rally in U.S. Stocks: https://moneymorning.com/2011/12/19/why-we-may-see-a-rally-in-u-s-stocks
[17] How To Profitably Trade The VIX In 2012: http://investmentunderground.com/2012/01/06/how-to-profitably-trade-the-vix-in-2012
[18] S&P to Eurozone: Fix It or Else…: https://moneymorning.com/2011/12/07/sp-to-eurozone-fix-it-or-else
[19] Volatility Index (VIX): http://www.wikinvest.com/index/Volatility_Index_(VIX)
[20] S&P 500 (SPX): http://www.wikinvest.com/index/S%26P_500_(SPX)
[21] Wikinvest: http://www.wikinvest.com
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