Market Posture Week of March 5

For this market posture I want you to look at your charts.

First, let's look at the one-year, daily chart. Now, considering the rise in Implied Volatility, which may be here to stay for awhile, look at the potential trading range for the SPX - I see it between 2650 and 2785 as of the March 2. The SPX can easily swing in this 135 point  range as volatility remains high. We'll know when the volatility is subsiding as the index trades in a smaller range. You will see higher lows and lower highs likely. Going into this next trading week the SPX should NOT fall below the 2650 support. If so, we can easily plan on more short-term down trending.

Also, look at the Stochastic. The FastK line is below 50, but the FastD line is still above 50. The FastD line should not fall below 50 or our short-term swings can continue to have a down slope.

Looking at the Market Forecast line, the Near-Term (blue) line has swung all the way above 80 and below 20. This kind of motion indicates strong volatility in the market. Volatility will be subsiding as this line stays between 20 and 80 as it swings, but more so, volatility will subside once this line favors a direction. More top side touches vs down side touches.

For the second part of the market posture I want you to look at your three-year weekly chart. This is not a promising chart. The last candle is bearish after a short bounce (bear flag on the intermediate trend) For the intermediate trend to garner strength this next week needs to end bullish, not bearish. If this coming week is bearish we may be looking at an intermediate-term lower low.

The Stochastic on the weekly chart is just skimming the 50 level (FastD). Bulls do not want to see this line cross below 50 by week's end. The longer the FastD line stays below 50 on the weekly candles the more bearish the market can become.

Also indicating more intermediate bearish behavior is the Near-Term line on the MFC. This line fell below 20 on the week of February 5, and since then it has bounced higher, but failed to rise above 80 before turning bearish again. It's good that it is above 50, but this coming week could send it below 50 if the market is bearish enough.

My final thoughts are that the market is definitely showing more bearishness than we've seen in over twelve months. Be cautious about the size of new investments. Consider hedging (strong hedges) and take profits when you can to reduce exposure. Hopefully March statistics will play out the way many of you would like - 68 percent chance of being bullish. Don't let it take you by surprise, however. February was weaker than "normal."

I hope this helps.

Craig