Charting the S&P 500: A Bridge Too Far

As we witnessed a significant amount of fear this past week -- the VIX spent the entire time above 31% -- there is the notion that sheer panic is all that is left for this market to reach a bottom. That is one school of thought, but we don't share that idea.

The continuous search for tops/bottoms is a difficult game to play. Mind you, some of the best buying opportunities occur at market bottoms, but an index that is in a downtrend, such as the S&P 500 and others, will have many interim bottoms. However, it is the LAST one that matters most. Obviously we won't know we are there until later.

Suffice to say, September came and went with a fury of fire, putting the bulls on notice there will be more pain to come if you're not cautious and protective.

The weekly chart, below, shows a break of the June lows, plain as day. The channel we drew in a couple of months back is still in play, and a test to the lower band would be a push down to 3300 currently, but ultimately 3000.

The relative strength on the weekly has rolled over, and to show the strength in volatility the Bollinger bandwidth is rising as is the ulcer index.

The The Traders Dynamic Index (TDI), previously discussed here, at the bottom, crossed and started rolling over in August; this has been on a sell signal since. And notice the purple bars in the price window and the bearish SAR (big arrow). This tells us the trend is down and it is very strong.

Oversold readings are here now, but that is not a reason to buy. Remain cautious.

https://share.trendspider.com/ chart/SPX/4669q1gi4n