In the market Wednesday we had a number of technical situations develop as the short squeeze wound down and the market retreated.
- Chart 1 - the S&P 500 climbed up to test its blue line 50 day EMA and was rejected by it
- Chart 2 - the NASDAQ climbed up to test its 50 day blue EMA line and was also rejected by it
- Chart 3 - the VIX (Volatility Index) found support at its 50 day EMA line today and bounced up from it
- Chart 4 - the VXX (iPath S&P 500 Vix Short Term Fut (ARCA:VXX)) found support at its 50 day EMA line and bounced up from it
- Chart 5 - the two year Bernanke bubble channel where after four days of climbing the S&P reached up to the lower line of the channel today for the token back test and was rejected by it
- Chart 6 - the VXX has a high quality lift setup ready to start with EMAs that are twice as large as the ones that caused it to rocket two weeks ago
- Chart 7 - the VXX found support and bounced up from its lower channel line today
Taking a look now at the short term channels of the Indexes shown in the charts above. The S&P and NASDAQ were both rejected by their blue channels they were trading in before the market sell off. The lower two charts shows that VIX and VXX both found support and bounced up from the lower lines of their blue channels.
Putting it all together the market looks poised to start another wave of selling unless we have another overnight S&P Futures or pre-market SPY intervention by the Fed. Speaking of the Fed intervening in the stock market, the headline story at MarketWatch.com today was a good piece on what's going on behind the scenes in the stock market. The links to the article and another article it mentioned are Opinion: The world’s best market timers: the Federal Reserve and ‘Plunge protection’ behind market’s sudden recovery. Another article that came out last month The Fed's Plunge Protection Team on Real Money The Street.com explains how Reagan set up what is referred to among traders as the PPT or Plunge Protection Team or as I often refer to the current PPT, Team Yellen.
The truth is that the stock market has slowly morphed over the past six years from an independent investment arena into a micromanaged component of the US economy.