The week ahead 5/31 - 6/03

Lets start with what last week meant for the market. We started the week on a negative note with the major markets all opening lower flirting with their 50 day moving averages. On Monday the Dow, S&P, and Nasdaq had all violated and closed below their 50 day moving averages. Leaving the Dow Transports alone above their 50 day moving average. To confirm the weakness of the market the VIX had a spike above its 200 day moving average signaling that protection was being bought. All signs pointed to a bloody week and a possible correction underway. Tuesday and Wednesday were both weak days but with light volume and no panic selling. I was a little surprised. The major markets have been flirting with their 50 day moving averages for months and this was the third leg down which usually means you will see some panic selling but you didn't. I had noticed the same old story that I have been telling my subscribers all year; the VIX had a big spike up and then slowly drifted back down. The VIX cannot hold a rally and the market is telling us that it will not break with a weak VIX. The other market to be watching is the Dow Transports. They remained strong by holding their 50 day moving average and daily uptrend. This has worked all year. When the market has a weak VIX and one of the other major markets (S&P,Dow Industrials, Nasdaq, or Dow Transports) is strong then no panic selling, no correction! All of the stars have to align to bring this market down and we have not yet seen that.

Looking forward to this week; the weakest market continues to be the Nasdaq failing to close above their 50 day moving average unlike the others. They are the leader to the downside. Intra day when I get sell signals from my strategy I will first look at the Nasdaq to see how they are trading. This will help me decide how short I really want to be. If the Nasdaq confirms the strength of the other markets by closing above their 50 day moving average I will be laying off on my shorts and be more aggressive with my longs. The S&P, Dow Industrials and Dow Transports all closed above their 50 day moving averages remaining strong just awaiting confirmation from the Nasdaq. Also keep an eye on the extremely weak VIX. If the VIX continues to stay weak, stay with your longs but if it starts to grind higher with the Nasdaq still below its 50 day, then maybe the shorts have a chance after all. Also note that Tuesday is the last day of the month so watch for big orders on the close and expect a choppy trade because we are now heading into rollover.

E-mini S&P

DJI

E-mini Nasdaq

DJT

VIX

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