Tuesday, September 1, 2015

Eyeing SPX 1900

The market has shown it cards.  And it's no full house.  I heard on CNBC last Thursday that traders were eyeing 2040 for a rebound, when the market was at 1990.  I thought that was insane.  Apparently, I am not the one who lost his mind on the bounce back last week, it was the others who thought we could shrug off a VIX 50+ event like it was just some HFT computer glitch.

I am not going to regurgitate worries about China or global growth or the other excuses that you hear in the media about the reasons for weakness.  It is a simple look at the chart of the broader market.  You are negative on the year, by about 6%, you are at levels that haven't traded regularly since last summer, so you have a mountain of overhead resistance, while the market is overvalued, while there is no positive catalyst.   The key is this: the Fed is not on the bull's side this time.  There is no QE.  They were there the whole time from 2008 to 2014.  When you see bonds selling off with stocks, the market has problems.   

I still view this market as a chop fest at a lower range.  We have established the lower boundary, around SPX 1870, with a higher boundarry of SPX 1990.  SPX 1900 is a good level to put on longs, for a trade.  Perhaps we can get to that level later this week.  Crude oil is also a short, with the biggest short squeeze I have seen ever in the product.  I would short anything above $48, and cover around $44-45.  The downtrend is not over, and commodity downtrends last a lot longer than equity downtrends.  

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