SPY)" src="http://wallstreetsectorselector.com/wp-content/uploads/2011/12/spxpf121111-300x236.png" alt="S@P 500 (SPY)" width="300" height="236" />While headlines focus on the Fed and Europe, technical indicators offer clues to possible future market action.
Today the news was all Dr. Bernanke and the Fed, along with Chancellor Merkel and Europe, and stocks slid in response. However, important technical indicators point to possible future market action.
In the chart of the S&P 500 SPY above, we see how the index rests right on its 50 Day Moving Average which has offered significant support. A break south of here would be bearish for future price action while a bounce would favor the bulls who are hanging on by a thread and need to punch through the 200 day moving average to establish control of the market.
In the chart of the Dow Jones Industrial Average DIA we see the index hanging onto its 200 day moving average and the 50 day moving average turning up. Again this index is at significant support and so at a major turning point in the life of this market.
Most interestingly, the VIX VXX actually lost ground today, closing below its 200 day moving average. This is a contrarian indicator for the bears as the VIX is known as the “fear” indicator and would have been expected to rise with falling stock prices and if fear was taking control of the market. So now if the S&P 500 IVV and the other major indexes can hold their ground, a move higher would not be unexpected since fear, as measured by the VIX,VXX is actually declining and indicates that major option market participants are expecting a decline in volatility over the next thirty days.
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