What today's rise in equities markets means in terms of the bigger picture across markets

Although equities rose today, there actually was not enough movement - including in the height of the rise, and in other markets such as the very important dollar - to truly change anything from the bigger-picture perspective. For those thinking about whether or not we'll see a new high (such as 963 or above 980 in the SPX, and 1912 or better in the Nasdaq composite), or just a right shoulder for a bearish "head and shoulders" pattern - here's the best way I can explain what I see happening right now. We appear to be dealing with a market cycle low, that bottomed last week, and it's producing a reaction by equities rising out of it. With interestingly similar timing in the cycles for oil, gold, and the dollar. As I'm not a deep cycles expert I won't get into the details of trading cycles versus seasonal cycles and all that. I just know that this is affecting the markets right now - and that it doesn't guarantee one way or the other, whether the cycles rise for equities will "guarantee" new highs.

From another perspective, another way to explain it is this: On the bearish side, we know that a LOT of people caught onto the "head and shoulders" idea and probably too many people saw it - that's often a clue that an idea like that, is wrong. On the bullish side, a lot of people are aware that this is traditionally a window dressing time period, plus many fund managers put new money to work at the beginning of the month and there are some studies indicating that prices do tend to dip a bit into the 25th or 26th of a month and then rise into that new month-new money time period. And, well, there's just that holiday coming up and sentiment can be positive heading into it. (That Schaeffer's Monday Morning Outlook discussed it too.) This idea tends to be more resistant to contrarian action.

Being practical, we now just have to see whether or not rising equities during this time period will produce a new high (above SPX 956) or a lower high (whether it stalls at 935 or 946). That basic concept actually seems to be true not only for equities but other markets like oil and gold. And for the dollar, whether it produces a new low or a higher low.

The VIX intraday low went to 25.29, so it got almost to my next significant Fibonacci retracement level for it, which is at 24.78. If we see 24.78 tested this week or later (can be exceeded slightly on the test), then we can think seriously about following VIX up on a rebound from there (and the inverse for equities).

For now, the daily chart below shows how the SPX's rise looks for the day. It moved up toward the level that would make a right shoulder at the same price level with the left shoulder. I also posted a "charts roundup" overview across many markets at my UBTNB3 blogspot (link at right), where I'll also post the McClellan technical data when available.