Market Waiting to Hear from Fed

Yesterday, blog reader Rob, pointed out that the VIX fell off a cliff and closed below its lower bollinger band.  Elliott Wave International also pointed it out in last night's newsletter.  Once the VIX closes back above that lower bollinger band it issues a short term stock market sell signal.  The last time this happened was only a few weeks ago on September 3rd and 7th.  Although the market did not selloff, it actually continued rallying higher since then.  So we will soon have two VIX market sell signals in place with no notable pullback to account for them.  Now yesterday was light Columbus day trading so I'm not sure how important this signal is.  But having two of these signals occur during a major topping process adds up to a significant development in my view.

I've read some options traders talk about how significantly bullish the VIX action is because it shows people are more comfortable with the market right now.  But in my view, at this juncture, people should NOT be comfortable with the market at all.  And that high level of comfort is what gets bulls into trouble at major stock market tops, which I believe we're at or near.

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The market appears to be waiting on the Fed minutes to be released within an hour.  Once that's released, we should get some volatility back into the market.  So far the decline from the recent high is a 3 wave move, but can easily subdivide into a 5 wave impulse move.  And as long as we keep getting lower highs and lower lows, we can continue to increase our confidence in Minor wave 2 being complete.  Any further upside push above 1169 in the S&P should lead to a charge toward the 1173-1181 area before topping.

The euro has continued to decline impulsively in the short term, but on the hourly chart I only count 3 waves down, so far.  Breaking below 1.3832 last night removed the most likely alternate 4th wave triangle scenario which would have lead to a sharp thrust higher before topping.  So just like the stock market, as long as the euro continues its series of lower highs and lower lows, we cant continue to gain confidence that a major top is in and start counting the decline impulsively.

Now let's wait for the post-Fed action.....

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.