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SPX compared to the other big economies. VIX awful quiet.

October 23, 2009
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Here’s a look at the SPX for about two and a half years with some of the major economies plotted for comparison.

(click on the chart to see it larger.)

The rising wedge is a bearish structure where the market is uptrending with higher lows and higher highs, though the new highs are decreasing in their strength/distance/momentum.

And now a look at the last six months.

Despite our very strong rally of about 50% off the March lows, we still seem to be showing relative weakness to the rest of the global stock markets.

Here’s a look at the entire structure of the bear market since 2007 and the major ascending wedge since the March lows. In addition to the convergence of the wedge and what looks like waning momentum to the upside with each new swing, we are also knocking our heads right under the 50% retracement level. $107.37 represents the former high and new would-be support. When this level breaks, it will be a major crack in the foundation for further near term gains. The index is above its upward trending 50 MA. On the down side, there is long term downward resistance from across the highs of ’07-’08 approaching overhead.

Looking at the very long term VIX monthly chart, we do see uptrend line was broken and it would seem likely to see the VIX settle back into a range of roughly 16 on the low side to 40 on the high side.

On closer look, the VIX did just break below a three month range, arguing for continued complacency in the markets, but it does seem awful overdone to the down side here and any uncomfortable developments or negative surprises would bring the VIX up a quick 5-8 percentage points and still be in that recently familiar range in which the market did quite well.

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