Jan 26

Weekend Outlook for 27th January 2014

Markets had one of the worst weeks in the past year this week with VIX increasing and fear entering markets again.

Is this start of a big correction or is it just another little pullback?

Well – for now it looks to me that it could be start of a larger correction to the downside. SPX and Dow Jones both broke below MA50 which tells us bulls need to be careful.

Very short term charts remains oversold so I would expect a rebound either way ,, so early this week expecting upside , but late this week I think we could sell off some more. We got FOMC this wednesday so we might move UP into FOMC ,, and then a move down after.

1. VIX remains very elevated now and expect a short term pullback on VIX before higher (this means markets could rebound before going lower)

2. NYSI suggest mkts very overbought and is still on a buy signal so far,, however could turn to sell signal soon with mkts going down – so this is actually most bearish looking

3. Gold had an amazing start of 2014 ,, expect a brief pullback on Gold/Silver before going higher imho.

So my main view is this – that markets topped out and has started a larger correction. However we cant really be sure yet ,, but to me it looks quite toppy with a lot longer term bearish divergences. IF we started a correction I would expect SPX to drop 100-200 points from current levels. Short term charts suggest that we should get an early rebound in mkts and after FOMC it is possbile we will sell off further.


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