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Thursday, October 23, 2008

Make or Break Today

Today is a make or break day.

On the S&P 500 (SPX) the intraday low at 865.83 was significantly better than the previous intraday low at 839.80. The closing lows were also higher. Yesterday's lows around 875.81 must hold or the market becomes vulnerable to a sudden implosion to new lows.

For the S&P 500 (SPX) to remain in the Symmetrical Triangle on the 5 day 60 minute chart, prices must go up today. There is no margin for error. A down day would result in a break DOWN and OUT of the Triangle... and result in new market lows.

Volatility (VIX) appears to have maxed out for now. Everything above 70.00 consists of an intraday 'selling tail' on the candles, suggesting that a move higher is less and less likely. These levels would appear to be unsustainable, 10% intraday ranges in the S&P 500 will tire even the best traders. Expect VIX to drift lower as the credit markets improve and equities catch a nice bid as some of the sidelined money looks for bargains.

For the month of October at least, the TED Spread is heading in the right direction. On Friday the TED spread really improved. This week will be critical because significant follow thru is required.

1 month LIBOR (black, red line) has clearly peaked at 4.59%. Although LIBOR is now so discredited as to be purely symbolic, continued improvement is required for equities to find a sustainable bid.

The 3 month T-Bill is moving in the right direction now yielding over 1%, up from almost ZERO just a few weeks ago.

9 comments:

Alessandro said...

Ben, look at the international credit problems. Whole Countries are on the edge of the cliff. That triangle has many reason to break south.

I think stock market internals are not realiable now. The problem is elsewhere and the problem is escalating.

Take care.

Anonymous said...

Is it me or have the chaps on CNBC seemed to be over their meltdown? Wild moves in the market does not seem to get the coverage. A 700 point move was met with " oh gee ". I guess my take is we have hit some sort of bottom because everyone seems to have come face to face with reality and now we are lumbering through it. It's like the country has just got over it's hangover and now is taking the medication.

Anonymous said...

i agree with anon.
I see the same on the BBC. Yesterdays decline of more than 7% was just a blip on the radar compared to their past hysteria over every few hundered dow points.
THe longer we meander the better i think. Especially as all flows seem to be liquidations.
Ultimately, treasuries have to be a source of funds for stocks.

Anonymous said...

higher lows, lower highs. It will break soon, in the prevailing direction. Massive intervention today though, makes charting highly likely to be wrong.

Anonymous said...

Futures lock limit.... look out below...we've hit an iceberg captain

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