The Cash Open Trading on the SPX on the 9th of August was marked by a range between 2900 and 2935. What was significant about the day was that the SPX touched the Dec18 TrendLine at 2900 and was then bounced off it by intervention, via AAPL being bought thru the Swiss National Bank and spiking the USDCHF pair. (The SNB remains the largest institutional owner of AAPL and FAANG stocks in the world). The FedResrv ofcourse cannot officially buy stocks nor can they be seen to be interfering in the US Equity Market, but they can however direct the SNB to act on their behalf.
The SPX waited for help from London after their close and after 20 minutes, realising that none was forthcoming, resorted to holding up the SPX above 2900 by manipulating the buy orders for AAPL. The suppression of VIX also seemed to indicate that sell orders were either held back in a queue or were completely dismissed. VIX is a determinant of the frequency of buys and sells and when it goes down, it indicates that the SPX is calm but that was not the case on Friday as there was heavy buying of AAPL and AMZN. The problem here is that the SPX wants to sell off but is being held back. Once selling pressure fires in from other Stocks then VIX will correspondingly explode as has been evident in the recent past couple of weeks.
This was a very weak intervention to avoid the SPX from breaking through below 2900 and the subsequent TrendLine.
The intervention was very obvious, as USDCHF and USDJPY both spiked at the same exact time as AAPL began to trade just above the gap fill open at around 201. (200 for AAPL is an important price line, as anything below that will open the door to 185 and below for the Company).
The US10Y yield began to lower drastically, indicating that real money is leaving the US Equity Market and heading towards the very safe US Bond Market. However as soon as 2900 was hit that flow stopped. I still remain inclined to believe that once the SPX does sell-off that US yields will fall as Bond Prices increase.
The upward max value that the SPX could achieve all day was 2935, (which I feel is the current ATH as we look ahead to next week, starting on the 12th of August).
One of the indications that this was an intervention, and a weak one at that, is that the breadth of the market on the 9th was shallow. It was just AAPL and AMZN which were being traded in order to prop the SPX above 2900. (AAPL and AMZN are both major components of the SPX and manipulating their price in times of stress can hold up the SPX above critical support lines).
Will this last? I feel that the answer to that has to be unfortunately, no. The SPX will test 2803 and will also test 2778. There is also an interesting situation developing in the SPX and that is, the signs of an emerging Head and Shoulders Pattern, with the Right Shoulder now seemingly being built. If that is the case, then it is a classic case of the NeckLine eventually breaking.
All this and more will take time to play out and the next 4 weeks till the September FOMC meeting is still the timeframe within which a break down to the June19 and Dec18 lows remains firmly within view.
The final point to note is the rapid selloff just in the last hour of trading which saw the SPX end at 2918, which is the top of the 30 gap between 2918 and 2898.
We are still nearly a 100 points below ATH and this week saw a unique DragonFly Doji on the Weekly Chart, (a huge one), one that is rarely seen and has been seen only twice going back to 2009. (Doji Patterns indicate that the Index is trying hard to rise but is unable to, usually an early indication of a Trend Reversal).