VIX Jumps As Stock Market Overbought In The Short-Term
The Night Owl Trader | Feb 16, 2017 01:40AM ET
The Hoot
Actionable ideas for the busy trader delivered daily right up front
- Thursday uncertain.
- ES pivot 2344.42 Holding above is bullish..
- Rest of week bias uncertain technically.
- Monthly outlook: bias higher.
- YM futures trader: no trade tonight.
Last night I was worried about the short-term overboughtedness of the market but with a solid four day win streak going I didn't want to stand in front of that buss so I called Wednesday higher. Good thing too because the Dow just kept on chugging, making it six in a row now (including the small doji that started this all off on the eighth). We are now in one of the steepest rising RTC's I've ever seen, with a Pearson's of 0.991. Now as we near op-ex on Friday and our penultimate market call, we're just looking for signs that this rally might be over and done. Let's see what the charts have to say about it.
The technicals
The VIX: In what was perhaps my worst prediction of the year (or all time) last night I said of the VIX that "I see nothing bullish about this chart." Well I still don't, but that didn't prevent the VIX from posting a giant 11.45% gain on Wednesday, its biggest since last November 3rd. It was most peculiar since the rest of the market also moved higher. I've never seen such a large disconnect between the VIX, which is usually inversely correlated, and the market as a whole. Just look at this chart. What to make of this giant green marubozu that erased two weeks worth of losses in one day? I'm really not sure. All I know is that we're now close to overbought while the stochastic just completed a bullish crossover. This is really odd.
Market index futures: Wednesday night, all three futures were mixed at 12:27 AM EST with ES down 0.07% but NQ up 0.05%.
ES daily pivot: Wednesday night the ES daily pivot rose again from 2331.50 to 2344.42. So ES continues above its new pivot (though not by much at this point) and this indicator continues bullish.
Get The News You Want
That big jump in the VIX on Wednesday can't just mean nothing. And the market is getting extremely short-term overbought, with the Dow's RSI at 94 and the SPX hitting 100. Unfortunately, that's about all I've got in the bear department. The trans continue to outperform and the cup and handle I noted in IBM (NYSE:IBM) two days ago is paying off nicely. But this winning streak is getting pretty old in the tooth and with op-ex coming right up, things could get a bit wacky. Right now I'm wanting to call the market lower but I really can't without some good old fashioned bearish candles. So once again I'll have to settle for Thursday uncertain. Such is life.
YM Futures Trader
No trade tonight.
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