Over a week ago, a friend asked when I thought the market will crash. I answered by saying I did not know. No one knows. I went on to do what I always do, look at the charts.
As many of you now know, I am a big proponent of the Ichimoku indicator. I placed the Ichimoku on the VIX chart. Before we continue, let us take a step back. My friend was asking about the US market as both of us are invested there. To review the US stock market there are two different products - the S&P 500 E-Mini Futures and the VIX. Why these two? The E-Mini because this what the institutions use to determine the direction of the market overall. The VIX because it is inversely proportional to the stock market. When the market goes down, the VIX is up and vice versa.
The market outlook we will use is the weekly timeframe. This is because the higher timeframes tend to tell us which direction the market will go. Let us look at the two products. The chart below is for the S&P 500 E-Mini.
S&P 500 E-Mini Futures courtesy Tradingview.com (Click image to enlarge)
The market outlook we will use is the weekly timeframe. This is because the higher timeframes tend to tell us which direction the market will go. Let us look at the two products. The chart below is for the S&P 500 E-Mini. As you can see, price action is above the cloud indicating things are bullish. Remember, if the price is above the cloud, things are bullish. If price is inside the cloud, things are neutral, in other words, consolidating. While the price below the cloud is bearish.
The next chart you see is the VIX. And as you can see, the VIX is bearish as its price is beneath the cloud. Remember, the VIX is inversely proportional to the market. As the VIX is bearish, you should expect the E-Mini to be bullish. Both these products show us exactly that.
The VIX courtesy of Tradingview.com (Click image to enlarge)
For those not familiar with Ichimoku, the cloud is used by some as a forecasting tool. As you can see on the VIX, the cloud is quite thick but becomes thin in September on the chart. This means that we should not expect any crash until at least that time in the year.
Having said that this is not financial advice as I lack the qualification. The market is a very fickle being. A market fall may be instigated by the slightest of events. This may come in form of an announcement by the government or a major corporation. And as to what may happen, your guess is as good as mine.
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