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Hello, fellow market enthusiasts! Today, let’s delve into the recent turmoil in the $SPX and uncover the factors driving this bearish trend.
**A Manipulative Rally and Its Aftermath**
The pattern of lower highs and lower lows on the $SPX chart continues to signal a bearish environment. Recently, we witnessed a very manipulative month-end rally, likely using the FOMC meeting as a smokescreen, which propelled $SPX over 100 points higher in a blink. This sudden surge seemed aimed at ensuring month-end performance fees. However, once that period concluded, reality set in, and $SPX plummeted 300 points in just over 24 hours of trading.
**Breaking Support Levels**
This latest plunge has broken support at 5400, a level that had held intraday declines multiple times in the last week and a half. Moreover, the gap down to 5370 has now been filled. A close below 5370 will add another bearish element to the $SPX chart, with the next support level potentially as low as 5200, mirroring the late May lows.
**Key Indicators Align with Bearish Sentiment**
Several key indicators are aligning with this bearish sentiment:
– **Equity-only put-call ratios** remain on sell signals. These ratios maintained their upward (bearish) trend even during the recent $SPX rally. They will stay bearish until they reverse course and begin trending downward.
– **Breadth** has shown strength, indicating small caps are outperforming big caps. However, if breadth turns negative again on Monday, breadth oscillators will confirm sell signals.
– **Implied volatility** is signaling a bearish state for the stock market, despite some mixed signals.
**Volatility Spikes and Sell Signals**
On July 31st, a “spike peak” buy signal was triggered when $VIX closed exactly 3.00 points lower than its previous peak of July 25th. However, this signal was invalidated as $VIX surged through the old peak, now trading at a near-panic level of 28. A trend of $VIX sell signal was also triggered on July 31st, when the 20-day Moving Average of $VIX crossed above the 200-day MA. Since $VIX was already above that MA, it signaled a sell. This sell signal will remain in effect until $VIX closes below its 20-day Moving Average for two consecutive days.
**From Bullish to Bearish: A Rapid Transformation**
The market has transformed from a bullish juggernaut in mid-July to a state of disarray within a few weeks. We are observing more sell signals and will act upon them as they are confirmed.
Stay informed and vigilant in these turbulent times. The market is always evolving, and understanding these shifts can make all the difference in our investment strategies.
Until next time, stay savvy!
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**Categories: Market Analysis, Stock Market Insights, Technical Analysis**
**Tags: $SPX, Market Trends, Technical Indicators, Volatility, Bearish Market**
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Feel free to share your thoughts and experiences in the comments below! How are you navigating these market shifts?