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posted on 19 May 2017

Markets: It's War!

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Back on April 25, I posted “How Broken is the Market?" and included the following VIX graphs. The first showed a long-term channel (below, in yellow) the bottom of which was occasionally tagged in times of extreme complacency. Each instance was followed by a correction.


Click on any chart for large image.

I contrasted it with a chart of the same channel which, over the past few months, has been under continual assault. Each plunge below the yellow channel bottom was timed to prop up stocks or push them up past resistance.

At the time, the North Korean situation was heating up. It seemed that a return to the falling white channel top was in order, so I put a dot there at 18.50ish and labeled it “War?"

I had no idea at the time that the “war" which would ratchet VIX up to such lofty heights would be one between politicians. Yet, here we are.

This is only the latest example of the incredible value of charting. The spike that popped up on our forecast several weeks ago enabled SPX to come within 2 points of our downside target yesterday. And, unless the charts are fibbing, we should get a nice bounce off this morning’s initial lows.

Econintersect note: The bounce Thursday morning was possibly less than expected, less than 1% from 2355 to 2376, followed by a fade to the close at 2366.

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