Forecasting the S&P 500 E-mini Futures Index...My Dumb Luck?

My post of April 5, 2014 refers.

The following Daily chart of the ES (S&P 500 E-mini Futures Index) shows what happened from that date up to the present. The ensuing swings overshot my projected targets a bit, and it took a bit longer for the "FROTH" level around 2100 to be reached, but price action generally followed the path that I forecast a year ago...price has been consolidating, basically, below that level since December 2014. Additionally, volatility did become the "name of the game" over those weeks and months, as I had anticipated.

As can be seen on the next Daily chart of the ES, 2100 represents a double Fibonacci confluence major resistance level that will have to be solidly overcome and held before bulls can resume any kind of sustainable uptrend. A break and hold below 1992 could see bears take the ES down to 1813, or lower. Until we see a solid break one way or the other, I expect volatile swings to continue in both directions to plague both the bulls and the bears.

Big Caps Fizzle While Nasdaq and Foreign Markets Sizzle

The following Year-to-Date Percentage Gained/Lost graphs are presented without individual comment to, simply, show where money has flowed in a variety of world markets since January of this year (until Friday's close).

This year, the majority of the money has flowed into the Nasdaq, Biotech, Homebuilders, Healthcare, the U.S. Dollar, U.S. Bonds, Silver, Russia, China, Japan, Australia, Germany, France, Portugal, Italy, Ireland, and Spain. The Dow 30, S&P 100, and S&P 500 Indices have remained, basically, flat, while Dow Utilities, Dow Transports, and Nasdaq Transports are down on the year, and Small Caps have made some minor gains.

U.S. MAJOR INDICES

U.S. MAJOR SECTORS + Biotech

U.S. MAJOR SECTORS + Homebuilders

MAJOR EU COUNTRIES

EMERGING MARKETS + BRICs

CANADA, JAPAN, BRITAIN, AUSTRALIA + MAJOR WORLD MARKET INDEX

COMMODITIES

COMMODITIES + LUMBER + HOMEBUILDERS + USD + US BONDS

MAJOR CURRENCIES

The following 1-Year percentage gained/lost chart shows the trend of the S&P 500 Index compared to the U.S. Dollar. They were, generally, in an uptrend until January of this year, whereupon the USD continued its gains, while the SPX consolidated in a large sideways range. From the beginning of March, the spread between them accelerated to the greatest extent seen over this one-year period, and they have been making some large volatile moves since then.

Whether this points to a capitulation and shift of money flow from the USD and into SPX (or whether we see a major correction in the SPX, with money flowing back into the USD) remains to be seen...it may be worth tracking the spread between these two to gauge such a shift in sentiment.

Furthermore, inasmuch as Europe has made such extensive gains, so far this year (compared with U.S. markets), we'll see whether this pace continues, or whether some money is taken off the table soon. You can see on the following 1-Year percentage gained/lost chart that the spread between the German DAX and the Euro has reached an extreme level...in fact, the next chart, which begins in January 1999, shows this anomaly to be highly exaggerated and unprecedented.

The German DAX may, in fact, be well overdue for a major correction...another spread to watch closely over the near term.

Update of the SPX:VIX Ratio

As I mentioned in my post on February 24th, 150.00 is the Bull/Bear Line-in-Sand level for the SPX:VIX ratio, as shown on the updated Daily ratio chart below.

At the moment, price is back above this level, after bouncing in between 160.00ish and 120.00ish since that last post.

The following 2-year Daily chart of the SPX shows a high-volume spike made this past Friday. Generally speaking, each time such a volume spike occurred during this timeframe, it has been followed by, either, an immediate reversal, or one shortly thereafter. If history is to repeat itself, I'd say the SPX is due to reverse to the downside soon.

We may see clues of such an event develop in the SPX:VIX ratio chart above. Bulls will need to hold price above 150.00, plus we'll need to see the price of the Momentum indicator hold above the zero level. A drop and hold below those levels may see the Bears re-take control of the SPX and send it below its last swing low to, potentially, re-test the 200-day moving average, or lower.

Additionally, further clues as to direction may be found in the last update I've written in my post entitled "Major World Index Poised for Breakout or Failure?" at this link.

Major World Market Index Poised for Breakout or Failure?

* NB: See UPDATES below...

The World Market Index will need to recapture the 200-day moving average, as well as the 1900 level, as shown on the following Daily chart. Since it's still under the bearish influences of a moving average Death Cross formation, it's still vulnerable to a retest of the 50-day moving average, or lower, should we see major world markets plunge...a drop and hold below the 50 level on the RSI could point price in that direction.

UPDATE March 15, 2015:

Price has, indeed, declined to retest the 50-day moving average and is now sitting just above a major support level at 1800, as shown on the Daily chart below. A drop and hold below that would have serious implications, not only for foreign markets, but, also, U.S. equity markets. Also, the very recent daily uptrend has now been broken, as price has fallen back into a large sideways trading range. As long as the RSI remains below the 50 level, and the MACD continues to decline, we may very well see this scenario develop. Otherwise, we may see some very volatile swings in both directions over the short term, until a firm breakout from this range in a new direction is confirmed, one way or the other...one to watch closely over the coming days.

UPDATE March 21, 2015:

The following updated chart, as of Friday's close, shows that volatility is still rampant in this index. Price is, once more, poised to break out of this large sideways trading range to the upside. A break and hold above the 1900 level and the 200-day moving average, together with a hold above the 50 level on the RSI should see the bulls re-take control of this index. Otherwise, a fall back into the range will likely result in more volatile and swift swings in favour, ultimately, of the bears, inasmuch as it's still under the bearish influences of a moving average Death Cross formation

UPDATE May 22, 2015:

The following updated chart, as of Thursday's close, shows that price has broken above the 1900 major resistance level, retested it and bounced, after a bullish moving average Golden Cross formed in mid-April.

With all three technical indicators declining in value since the swing high of 1949.91 set on April 27th, we'll need to see price break and hold above that major resistance level, with confirmation of higher highs on the RSI, MACD and Stochastics indicators. Otherwise, we could see a major reversal at what could be considered a right shoulder of a bearish Head and Shoulders formation (with a downward-sloping neckline), that could send world markets tumbling considerably to around the 1600 level, or lower.

P.S. Price closed on May 26th just below the 50 moving average...stay tuned for fireworks...

Volatile Glitter

My gut tells me that GOLD volatility is about to hit the fan...as long as the RSI remains below the 50 level, and as long as price remains under the bearish influences of the moving average Death Cross, a break and hold below the 1200 level could, finally, see GOLD reach a potential target of 1150 or even 1000 (rather quickly), as I mentioned in my last post on GOLD.

Add a potential downside target of 7.75 for GDX (Gold Miners) into the mix, and you'll definitely see volatility spike...