All major indexes sold off aggressively today after selling in the futures resulted in a significant 10 point+ gap down in the S&P500. After initially bouncing off of 1,640, last weeks low, SPX gave way to too much supply and not enough demand, bringing it to a close of 1,630. Not only was today just a bad day, the price action was absolutely terrible. There was a bounce from 1,640 to 1,646 ahead of 10:00 but after that the market just kept hugging the lows and chopping to new ones all the way to 3:30. If you didn’t agree with my assessment last week, you have no choice but to acknowledge that the bears are no decisively in control in the immediate term.
Going into Wednesday (and the rest of the week/September) in general the market looks poised for more downside, but the easy trade is over. What I mean by that is after yesterday’s reversal off of the highs and close near the lows it was easy to guess on a gap down and 1,640 support test. Now between 1,600-1,640 things get harder. I wouldn’t be surprised to see the market try and form some type of relief bounce here vs 1,625-1,630 on SPX where we then see 1,640 act as resistance. I also wouldn’t be surprised to see us gap down again tomorrow and go tag 1,600 as it is only 1.84% below the current price level.
Sentiment has certainly soured but that doesn’t necessarily mean we can’t move lower. The VIX was up nearly 12% today but that’s actually not a whole lot when compared to some other 1 day spikes this year: 6/19 VIX rose 23%, 4/15 VIX rose 43%, 2/25 VIX rose 34%, 2/20 VIX rose 19%. Those spikes all took the VIX above the previous months high, and were right around key market bottoms. Today’s move did not break July’s high of 17.32 so it doesn’t share the same market bottoming characteristic that we’ve seen earlier in the year.
I have a few bullish scenario’s, that until they play out I’m going to continue to approach this market with a short bias:
1) VIX continues to move higher (above 17.32) but S&P500 holds 1,625
2) VIX drops back below 15 (10.5%) and S&P500 rallies back above 1,660
3) VIX soars above 20 and S&P500 holds support at 1,600
If the VIX continues to rise and SPX keeps falling then I’m looking for a 1,600 test. Below 1,600 and look out, we could get some serious floodgates in which I couldn’t overstate how important the June low of 1,560 would be from a support perspective. Key resistance now moves down to 1,640 first and then the 1,654-1,660 range. Above 1,600 just map support every nickel… 1,630, 1,625, 1,620, 1,615, etc…
My gut feeling? We print some 1,600′s. Note that hitting 1,609-1,601 classifies as printing 1,600′s.
Did you know that you can watch Stockhaven trade live in real time?
Learn how to daytrade by watching someone else trade! Watchhimtrade.com is the only site that lets you look over the shoulder of a professional daytrader.
Watch this video now where he shows you how it’s possible to make 100% in just 5 minutes!