Last week I wrote that you shouldn’t be buying the market dip. At the time the S&P500 was in the low 1,640′s. Today SPX gapped up and hit a high of 1,674, or about 2% higher than where I said you shouldn’t be buying at. I was wrong. I’m not going to play Monday morning quarterback and try and figure out where I went wrong. I find it much easier and efficient to instead just move forward and analyze the most recent price action and apply it to my outlook moving forward.
The best part about last week and today is there are now key levels to watch in the S&P500 moving forward. Before the momentum was so fierce that there weren’t any nearby price levels that you could point as key lows or key highs. That has changed. There are 2 “zones” of support I am watching moving forward. Wednseday low of 1,648-psychological support at 1,650 and Thursday’s low of 1,635-1,640. As for resistance, the fade off of today’s 1,674 high makes that level key resistance moving forward.
Recently, I said the 1,000 level on the Russell 2000 was a key millennium level to focus in on. You’ll recall that the same day the Russell extended above it, it quickly retreated back below it and that ushered in the move lower in SPX overall. At 997, the Russell is still dealing with that resistance level. Now, a less important psychological level but still a good one to watch is at $20 on XLF. After moving above it last week, XLF’s failure to hold onto $20 also dampened the markets momentum. XLF again finds itself just below that level so use it as a reference point when you’re determining whether to be long or short this market.
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