Weekly Market Perspectives – 09/28-10/02

Weekly Market Commentary –
 

All appeared lost this past week as it early in the week it appeared as though the market were heading for a sell off after breaking out of the recent consolidation.

In times like these, it’s important to focus on the bigger picture and view things from a longer term perspective.

The weekly chart on the SPY continues to show that we are still in the consolidation pattern.

Even with all the week’s price action, all of the major levels we outlined the past few weeks have held so the following scenario is still in play.

We see 2 possible scenarios of which I believe the 1st scenario is more likely:

1.  If the SPY can hold the ~189 level then the expectation is that we see the market work its way higher.

We now have 2 upside targets in the form of

  • An unfilled gap @ 199.73
  • An unfilled gap @ 196.46 which is an attractive short term target.

The media’s weekend market coverage is covered in bear droppings.

I still believe everyone is overly bearish, and rarely does the market accommodate the masses.

My mid-term target continues to be the unfilled gap way up @ 208.32 which would result in a re-test of the symmetrical triangle.

2.  Else if we break and close below the consolidation pattern to the downside, expect to see the ~189 levels.

If the ~189 level fails to hold then we can expect to find ourselves back at the lows of 182.40 with the following downside targets –

  • Unfilled gap @ 188.07
  • Unfilled gap @ 177.48
  • Unfilled gap @ 173.22

The VIX remains at elevated levels however numerous downside targets in the form of gaps remain unfilled at 21.97, 17.62, and 16.26. Again if the VXX breaks down and fills some of the gaps below this would certainly be supportive for a broader market rally.

Keep your eyes on the volatility of the VXX.

Note how the ATR on the VXX is showing a downtrending line.
The VXX is consolidating here, and a break out of this triangle consolidation will give us some clear direction.

If the triangle consolidation pattern breaks to the upside, expect to see the 26.89 and 28.62 gaps filled.

The bullish case for the VXX remains that if the ~189 level on the SPY doesn’t hold, then 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 –

  • We’re seeing some healthy consolidation in the various sectors I’ve labeled Neutral
  • Take a look at a various rising bottoms
  • If these sectors can break the consolidation to the upside then this would be very favorable for a short term rally

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 – 09/28-10/02

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