Powell and the Triangle Pendulum Dilema

Markets paused on Tuesday following Monday’s big decline.

Today will likely not be a pause as we’ll be hearing from Powell.

The SPX has two “setups”.

1) It is in the daily Plus One/Minus Two buy position.

2) The volatility associated with Powell’s comments is likely to magnetize the index toward 3900 which ties to the 20 day moving average as well as a rising trend line from October 13^th.

An hourly SPX defines the 3900 support.

A 10 minute SPX shows shorter-term support at our targeted 3955 “square-out” from Monday.

So the SPX has carved out a triangle in front of Powell’s comments.

I would not be surprised to see price action above and below the triangle…a micro Triangle Pendulum.

Let’s see what IWM, The Truth Teller looks like.

IWM shows 3 drives to our mid-November turning point date where it tried to reclaim its 200 day moving average (red). In so doing IWM installed a declining trend line (black) starting from the mid-August high.

Remember mid-November is a turn date as it was 90 days/degrees from the mid-August peak.

Unless and until, IWM can reclaim and sustain above 186 pressure remains down as to the bigger picture.

Monday’s decline saw it close below its 20 day moving average (blue).

This is the 3^rd time it closed below its 20 dma since the uptrend from the October 13 low.

Each prior instance was a one-day-deal.

So far Monday could be a repeat. But the other instances saw IWM tag a rising trend line (magenta).

The bottom line is a close below 180  should see accelerated downside momentum.

This ties roughly to the 3900 level on the SPX.

Below is a VIX analogue from 2008 versus 2022 (updated through last Friday).

IF this nearly perfect analog were to continue right from here we would see a powerful upside explosion in the VIX starting any time taking it into January 2023.

We have no way of knowing if this will play out.

But we certainly have a POSSIBLE catalyst for that with contagion and risk with FTX.