So if bad news is good is good news bad? That seems to be the case as an initial pop on the back of better than expected data was used as a selling opportunity. Although the markets were able to put together their first 4 day winning streak since June, they finished well off the highs. Though the 4 day rally cannot be discounted, this month of August was the worst for stocks in 10 years.
With today’s high bears now have a clear level to get short against, 1,230 on the S&P500. We love situations like these where the market clearly gets turned away from a round number level because now we know where our risk is. From a short bias, the risk is that if SPX breaks above 1,230 it will set up for a test of 1,250 — a previous support level. After the rally we’ve seen though we think the market needs to do some back-testing of previous resistance to see if they can provide support. The main range we’ll be watching on SPX is 1,170 – 1,185 as this range acted as resistance last week so we’re interested to see if it can now become support.
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