Weekly Market Perspectives – 08/31-09/04

Weekly Market Commentary –
 

The Gap fill game.

This week’s price action could have been characterized as market pinball as the major market indices bounced back and forth filling the unfilled gaps.  The SPY retraced and tested the 50% level of its most recent swing and held, which is near term bullish.

As I updated mid-week on the Montreal Traders Facebook page and on Tradingview, the scenario we laid out last weekend was on the money and is still in the play.

However at this point it is important to note 2 possible scenarios.

1. If the SPY can hold the ~189 level then I would hold a stronger bias that we see the market work its way higher.

If the SPY clears the 199.88 level then we would be back to the races with the following intermediate upside targets –

  • Unfilled gap @ 195.55
  • Unfilled gap @ 206.51
  • Unfilled gap @ 208.32 and a re-test of the symmetrical triangle.

2. Else if the ~189 level fails to hold then we find ourselves back at the lows of 182.40 with the following downside targets –

  • Unfilled gap @ 177.48
  • Unfilled gap @ 173.22

The VIX remains at elevated levels however with now numerous gaps below at 27.32, 20.72, 17.62, and 16.26, that are likely downside targets.  I still think this sets up a favorable short-term environment for the markets indices to rally.
Only caveat as I mentioned earlier is if the ~189 level on the SPY doesn’t hold, we have a high probability of testing the unfilled gap @ 33.31.
Here’s an updated VIX (the Volatility index) chart below.

Here’s an update on our sector rotation watch.

Notables –

  • Utilities has resumed its downtrend
  • Although major technical damage was done to many of the former leading sectors, if the bottoms that were formed last week aren’t violated then time (consolidation) can still heal all wounds

The major sectors are posted here on Finviz for your viewing pleasure –

http://finviz.com/screener.ashx?v=211&ft=4&t=XLF,XLY,XLK,XLB,XLI,XLE,XLU,XLV,XLP

 

Weekly Market Perspectives – 08/31-09/04

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