The “Power of the Pattern” suggested on 8/11 that the S&P 500 index could rally as much as 20%, due to “Extreme Fear/VIX levels” (see 20% rally post here). So far the 500 index is up 10%+ off the lows, about the half-way point of the average rally after the VIX hits the 50 level.
What does “Panic look like” that led to this rally of late? (see post here)
Last week I shared that from a performance angle the 500 index had been a “Real Dog this month, yet it should act stronger for a while“. (see Dog acting stronger here)
From a “Buy, Hold & Hope” strategy, August has been a rough month, yet the rally of the past couple of weeks has helped to reduce losses. The key question now is….Will the “old Dog be running out of strength anytime soon?”
CLICK ON CHART TO ENLARGE
With the VIX breaking rising support at (1), odds increased that upward movement in the 500 index should take place in the short-term and that upside movement should continue to the upside for a while! Now the 500 index is within 3% of ultra-important overhead Fibonacci resistance and the underside of the 200-EMA (not shown)!
The “Power of the Pattern” is suggesting that the 500 index will run into key resistance that will challenge its ability to make the average 20% return, pretty soon!
Market can rally as long as the politicians are on vacation. We will run up close to resistance in the next few days and then they will come back and scare everyone and we will be on our way back down.