Just the facts, ma'am: what the VIX and McClellan charts are saying about equities markets now

Going into market review this weekend, I'll start with the VIX because a number of others have mentioned today that the VIX "broke its trendline." Hey, I think I'm flattered that others are using trendlines for VIX now too! Seriously, let's take a look (my VIX chart below) - okay, it dropped back underneath the upper channel line that it moved above earlier in the week, but didn't make it back down to the bottom channel line. And, it dropped down to where it may well receive lower Bollinger Band support; besides, it has a tendency to drop on Fridays. Still ... I've gotta say, as much time as the VIX has spent under my $33.81, it might yet want that $24.80 which is another, deeper Fibonacci retrace back to its February 2007 lows. Then again, there's my weekly VIX line chart (second chart below) - with the VIX looking like a lower weekly close, it's reaching down but again toward that uptrend line. Support at that line would prevent it from getting under $25, and at this point may prevent it from getting under $26. On the daily chart, I've placed an early, hypothetical uptrend channel line and we'll see if the VIX will work with it.

The McClellan charts for NYSE and Nasdaq (also below, courtesy of DecisionPoint.com via Stockcharts.com) are documenting increasing market weakness. I've again placed trendlines and other markings to draw attention to what's happening. Of course, a few days ago I posted here those charts showing where the Oscillator may get support from a shallower uptrend line associated with the apparent triangle action ... well, it happened! It went along with the possibility we'd looked at, that the market would move up before going lower into opex. Except that the way the timing worked out, the move up continued through this morning. On the daily chart, it actually rather fits with a classic chart pattern (and with the idea of Elliott Wave, small wave 1 down and 2 up) of five days down, then two up. Leaves us waiting over the weekend to see whether Monday triggers by moving under Friday's low.

Now that the McClellan Summation Index has moved lower, it's also telling us that over the intermediate term we can expect market weakness. It's still well above its zero line though, so it doesn't guarantee that the market does a serious retest of the March lows. As time goes by, it will be interesting to see whether or not a retest (or lower) coincides with the Summation Index going to its zero line ... we'll just have to remember that idea down the road.

On the Nasdaq McClellan Oscillator, I should have drawn a line slightly steeper from the March low to its May low - looks like the action today would be a retest of that steeper line that it moved under.

The faster-moving line of the ratio index moved under the zero line in both the NYSE and Nasdaq McClellan charts, and then curled up toward it today. There are some people who are thinking that the McClellan data can be interpreted positively, on the assumption that these data have finished some pattern and are ready to move up. Well, the classic interpretation is that when below the zero line, it's bearish. These patterns with the triangle are interesting and can be used for either trading or determining positive or negative divergence, which is certainly what we've done. But the only bullish thing I see on these is the Summation Index, and then only in the sense that it's above the zero line - even it has rolled over and needs to be watched for the intermediate time perspective.

But hey - I saw a headline this evening about $1 billion being approved for a "cash for clunkers" program. I don't know if that's a final approval - but isn't it just another sign of "green shoots"?! Okay, just had to mention it!