And with doji candlestick patterns used as a signal for the potential end of an ongoing trend, this doji candle piqued my interest, as it occurred in a month in which the 24-month moving average was tested. Such doji candles on a monthly chart are not that common. In other words, the opening price for May (4,130.61) and closing price (4,132.15) were about the same. There was another interesting piece to the May close in that the monthly candle was a doji. Call buying on VIX futures is still relatively low relative to put buying, suggesting the VIX may retreat further in the coming weeks and break the current pattern. While the May close does not definitively mark a bottom, as I suggested last week, it may give some of you reason to tip-toe back into the waters, or if you have the urge to do more than tip-toe, use the three-week retreat in volatility, as measured by the Cboe Market Volatility Index (VIX-24.79), to hedge long positions.Īs a quick side note on this retreat in the VIX, note on the three-month daily chart below that since moving back above the level that coincides with its year-to-date 50% gain on April 22, it has been pinging between levels that coincide with 50% and 100% above its 2021 close at 17.22.
Specifically, the index closed the month above its 24-month moving average, giving new life to bulls who were on life support just weeks earlier. With the month of May ending last Tuesday, long-term bulls added another piece to a difficult puzzle, with the S&P 500 Index (SPX-4,108.54) closing above its 24-month moving average, rallying from a multi-pronged support area – as discussed in the excerpt above – earlier in the month.
One major difference between now and then is in 2020 we were on the cusp of major fiscal and monetary stimulus, whereas now, the Fed is hiking rates and no longer buying bonds, and fiscal stimulus is a thing of the past” Note that this low was also in the vicinity of 3,852, the SPX’s close when President Joe Biden took office in January 2021…one need not look any further than March 2020, when the SPX troughed in the 2,270 area, which is where the index was trading when Biden’s predecessor Donald Trump took office in January 2017. The first is the area at which the SPX troughed earlier this month, which was a round 20% below the SPX’s all-time closing high and 2021 year-end close. “… there have been a couple of technical developments that are encouraging for bulls.
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