I told you coming into today that this was a tricky set up and the action that played out during the trading day certainly confirmed that. A flat open was bought up with the S&P500 exceeding 1,520 within the first 15 minutes of the day only to spend the next hour drifting back towards break even. From 11:00 on though the bulls were in charge, running SPX all the way up to 1,525 from 1,515 by 2:30. However, at that point SPX began to struggle, just as the Dow came within 15 points of its all time closing high. Going into the last 10 minutes the indexes were set to close modestly higher, but then the VIX broke 15 and things got ugly in a hurry. SPX went from 1,520 to 1,514 where it closed setting the stage for another interesting day tomorrow.
- VIX 15 was the story today — The action around VIX 15 confirmed that it is indeed an important level to watch
- Leaders gave you clues — Following market leaders GS & GOOG gave you good clues that the advance above 1,520 deserved to be approached with skepticism
- What to watch for now — Back in a familiar channel means we’re back watching familiar supports and resistance
“Should the VIX find footing tomorrow and move back above 15 then I will not expect much movement beyond today’s high in SPX.”
-Stockhaven’s Market Take 2/27/13
The VIX spent the first 5 minutes of the day above 15 but that was it, falling towards 14.50 shortly thereafter. Even more telling was the action at 11:00 on the VIX when SPX was testing the break even line, it got perfectly rejected at 15. Once that rejection happened is when the indexes made their dash higher. If you didn’t believe the 15 level was a good signal, the last 10 minutes of the day prove otherwise. That’s when the the VIX broke 15 propelling the swift down move you saw into the close. Watch this 15-16 range we now find ourselves in as a move above 16 sparks more selling while a move below 15 will have the recent bottom remaining in tact.
Other market leaders like GOOG and GS also gave awesome roadmaps to the market today. You’ll notice that as the market was pressing higher in the afternoon, both GOOG & GS were only up marginally. Those marginal gains were doing little to confirm the break above 1,520 in SPX and if you shorted the move based on GS & GOOG you were rewarded nicely ahead of the close. The $150 level is key on GS as is the $800 level with GOOG. Today was a good example of why you must identify how market leaders are trading before committing to a move in one direction or the other, in this case it was not to trust advance.
You can essentially erase the early part of this week given that the S&P500 finds itself right back where it was for much of February, between 1,495 and 1,530. As a result the channel that played out for much of the month is back in play for March. This means we’ve got resistance between 1,520-1,530 and support between 1,495-1,500. Below 1,495 and expect a test of the 1,485 low ahead of 1,470 support… above 1,530 resistance and expect a test of the all time highs.
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