The popular averages fell back to the downside on Friday. A fall in the price of crude oil may not have been helpful. This out of fear that producers may not agree to a production freeze over the weekend. The Markit flash PMI of manufacturing activity indicates growth but at a reduced pace. Meanwhile, the price of gold fell on Friday.


   Above is my 3-month chart of the S&P 500. While my outlook arrows were green, there was a nice hop above the 50-day moving average on May 24 with some continuation afterward. The selling that began on June 9 then painted my weekly outlook arrow a cautious yellow as the 50-day moving average was approached. That moving average was breeched intraday on June 14 and the SPY price closed just under on June 15. That colored my monthly outlook arrow yellow. The fall further under on June 17 turned my three-month outlook arrow yellow.


   The rise on June 20 brought the SPY price back near the 50-day moving average and it inched above on June 21. It remained stuck there on June 22, keeping my technical outlook arrows in a cautious mode. The jump above on June 23 briefly pointed them upward. However, the plunge on June 24 in response to the unexpected Brexit quickly repainted them yellow. The rebound on June 28 above the 200-day moving average restored them to green. The continuation above the 50-day MA that followed appeared to bode well.


   The big jump following the Brexit scare in late June led to a more gentle rise beginning in mid-July resulting in several SPY records. Then came the huge drop on September 9 through the 50-day moving average amid heavy trading volume. This resulted in a big gap, i.e. the session’s high was significantly lower than the previous session’s low. The large jump in the VIX (volatility index) appeared to be a sign of panic. The sharp fall through the 50-day MA would ordinarily not bode well. However, gaps are normally filled fairly quickly, especially if the VIX is high, although not always immediately.


   The strong bounce on September 12 tickled the 50-day moving avereage but failed to fill the gap. The rest of last week was highly volatile with sharp moves in both directions amid heavy trading volume. On Monday and Tuesday this week the SPY became becalmed then moved upward on Wednesday and Thursday before a fall on Friday. The SPY price will have to get back above its 50-day MA before I can consider an immediate return of any of my outlook arrows to green.

Updated following  each market day

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© Curt Renz

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