S&P: Rising Wedge Vs Ascending Triangle
Alan Bradley | May 21, 2015 02:24AM ET
Over the past two months, we have seen the choppiest sideways action than we have seen in years. There are two clear camps of thought on where the market sits right now. The first group composed primarily of bears and those who recently exited after bagging a triple on the S&P 500 in six years are pointing to the ominous nine-month wide bearish rising wedge pattern or "exhaustion wedge" as many call it, as shown in the weekly bars chart of the S&P below.
The bulls are pushing the theory that we are breaking out of the day ascending triangle right now but the bears won't buy into it, reminding us that this S&P breakout just stopped at the upper line of the weekly rising wedge pattern.
Taking a look now at the Bernanke/Yellen four-year breakout channel shown in red lines in the chart below, we see that the S&P is continuing to work its way farther out of that channel with the upper level of its current trading range clinging to the lower line of that four-year channel by its fingertips.
Lastly, taking a look at the VIX (Volatility Index), we see that it has been shuffling sideways for the past couple of months around the 12.50 level, as shown in the chart below. This level in the past has corresponded with tops in the S&P.
The VIX could easily continue sideways for another few weeks until it gets to the huge blue downtrend line. At that point, there will be some serious soul searching among traders and investors.
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