This morning we posed the question would dips start getting bought? Today we got an early answer, kind of. Yes. Though not as emphatically as we saw during the early part of 2012, this morning’s weakness did appear to be met with buyers. After hitting a low of 1,383 at the open, the S&P500 bounced back to 1,390. We then saw two more subsequent bounces from 1,383 back to 1,388 before settling around 1,385. If SPX can stay above today’s low tomorrow then we could very well see a test of 1,400.
In the last 7 trading days coming into today 4 had been negative and 3 had been positive. Of those 4 negative days, each one saw SPX closing on the lows of the session. Today that was different though. While we did close closer to the low than the high, there wasn’t that outright bearish momentum that we saw during the recent pullback and we don’t think that should go unnoticed. To that point though, the VIX didn’t exactly hold up that well either.
Yes the VIX did finish the session positive, however unlike SPX, it was unable to hold above its morning lows, falling to new ones in the afternoon. Much like bulls want to see SPX closing closer to the highs than the lows, bears to see the VIX doing just the same. So our two key levels to watch from the bullish/bearish perspective is today’s low in SPX (needs to hold for bulls) and today’s high in the VIX (needs to break for bears).
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