Today’s action should be about new highs. We’ve had USDJPY ramping, and now face the .618 at the white channel midline which remains the line in the sand…
…and, SPX testing its former ATH…
…all in an effort to leave the 1.272 in the dust.
One of the major constituents in ramping SPX ever higher is, of course, VIX. Not too long ago, VIX was a measure of what stocks had done — a reflection of the volatility being exhibited in the market.
As we’ve discussed many times, it is now a determinant of stock prices — one of the tails wagging SPX’s dog. It’s one of several tools at the Fed’s disposal to ramp stock prices higher.
As such, it was a bit of a head scratcher when VIX slid below the purple .886 and purple channel line in late November and again in early December. The subsequent rally above 25 in the middle of the month, however, suddenly made sense of the earlier drops: a falling channel, shown below in white.
Today, VIX is dropping below the midline of that channel, and should continue falling — at least until our upside targets are reached.
continued for members…
It won’t be a straight line, but the general direction should help shape stocks’ continue melt-up. Speaking of which…
Last week’s steep channel would easily get SPX to 2138-2145 in the next day or two. I don’t know whether or not it’ll be that straightforward. But, there’s not a lot of Fib resistance ahead once SPX clears 2080 — just the purple 1.272 at 2108. It hasn’t been set up as an important Fib — no significant reversal at the .786 (or anywhere else, for that matter.)
Likewise, DX continues to enjoy clear sailing towards our 90.272 target. Yen and euro weakness show no signs of abating anytime soon.
EUR, in fact, is following through nicely on our thesis of new highs via breaking through previous resistance/support. The pair reached our 1.2263 target on Dec 8 and rebounded as expected.
But, as we had theorized, it was the retest and breaking of that support that would ultimately drive stocks higher. The same phenomenon is setting up on USDJPY and VIX.
I’ll update later if anything of any importance develops.
GLTA.