Last week I was discussing how to trade in an
environment like this. You need to have an
understanding of where support should be.
When the market topped at 2,134.72 on
May 20th where you thinking the S & P 500
should pullback from there?
The price level I was looking at that should act
as resistance just happened to be 2,132.82.
So, the logic dictated that a reversal off that
high would be warranted.
In other words, you did not want to consider initiating
any long positions.
Wait for the pullback to end.
The question is where should the market stall and
2,085.98 is the level where support should exist.
And as I write this, the S & P 500 is trading at
2,085.12. In other words, it is very close to
the support line.
So, do you just buy the market here?
My answer to that is no.
Personally, I want to see VIX start to move down.
The resistance level on the VIX is 15.63 and Friday’s
high was 15.65. Today, the VIX has made a high of
And it is still up for the day.
If the 2,085.98 level in the S & P 500 is going to hold,
then most likely tomorrow we will see the VIX move down.
That would help to confirm the support line in the market.
If the VIX continues up, then the S & P 500 will continue
to move down.
If that is the case, the next support line is 2,062.50.
If the S & P does move back to 2,062.50, that would still
be considerd a normal correction in a bull market.
Another way to say this, is that the market could drop
to 2,062.50 and the bull market would still be intact.
I want to mention another market and that is the interest
The Non Farm Payroll was mixed last Friday. And in
two weeks there is the FOMC meeting.
All eyes are on the Fed and if they are going to raise rates
this month, or will they defer to down the road.
During 2014, the TLT ran 40 points, from a low of
97.24 to a high of 137.09.
Since then, it has pulled back and now trades around
Support on the TLT should be around 115 and it not
far from it.
If 115 does not hold, I suspect 112.50 will.
Keep on eye on how the TLT reacts around those
If the TLT reverses to the upside, then interest rates
At that point, you want to consider buying high
yield as you will benefit from appreciation, along
with high dividends.
Just my thoughts for today.