Stocks Bounce as VIX Reversal and Key Levels Guide a Choppy Week
The week started in the green, precisely as suggested by the technical indicators posted in this publication.
The bullish thesis was primarily based on the Volatility Index $Cboe Volatility Index(VIX)$ posting a bearish reversal formation (bullish for stocks) on Friday, November 7th. Furthermore, breadth indicators also suggested a bounce. However, considering the long-term price structure for the indices and individual stocks, I maintained that declines do not occur in a straight line, and Monday’s bounce was likely part of a healthy consolidation.
The $S&P 500(.SPX)$ central weekly level of $6,747 was quickly conquered on Monday and began the week as support. Momentum continued, but the next weekly resistance level of $6,863 rejected the price action starting Tuesday afternoon, the selloff found support near the $6,620 monthly level in confluence with the lower Bollinger band.
The bounce seen on Friday Nov 14th was logical (though not obvious) given the opening gap down and how oversold the price was relative to the Bollinger Bands in the SPX and N $NASDAQ 100(NDX)$ . In fact, the NDX found precise support at the lower Bollinger Band, aligning with the $24,649 monthly level.
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