The Fed wisely put off raising the Fed Funds rate at its recent FOMC meeting. As a consequence, the
US$ has continued a modest downtrend, and this has sent mild risk - on signal to the markets. The
SPX has entered a correspondingly modest but volatile uptrend. SPX Daily
The 25 day m/a has turned up, and the VIX volatility or "fear" index has retreated from the late Aug.
spike up to 40 down through the technically important level to a more moderate 17.5 (bottom panel).
The market is now moderately overbought short term on a momentum basis at 3.1% above its 25
day m/a and in view of the spike in MACD. A fair number of traders would like to see another test
of the correction lows below 1880 given the extant volatility and the suspicion that even if the
market may strengthen later this year, the correction may need more time to run its course on a
seasonal basis. It hard to pound the table in opposition to this view. I am more interested in how
the SPX will perform against its 200 day m/a when that day comes. This challenge may be a little
ways off, but when it comes it will be important, since failure to take out the "200" would be a
bearish signal.
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