They took stocks to the wood chipper yesterday and threw the baby out with the bath water. You can now see a fairly obvious head and shoulders pattern on the S&P and the yellow arrows and the red line will show you the support line which is about the 1250 level. Only thirteen stocks in the S&P 500 were up yesterday and the VIX finally tagged $20.
Many technicians, myself included, are watching that level as support and are making that the line in the sand for now. One thing though, the market never makes it as easy as that, so 1250 may not be a guarantee of support, but only a guideline, A move to the 1200 level would not surprise me at all here, so stay on your toes.
Even though we are getting close to oversold, markets can stay overbought and oversold, I dont think that many can argue that we weren't extremely overbought from the 666 level up to the 1350 level as we only experienced minor, shallow and muted corrections where we all bought the dip and looked like geniuses.
I wrote apiece here a few weeks ago about the day the dip buyers stop dip buying You can read it here.
I believe GS is still looking for S&P 1450 by year end (excuse me, orange juice just went through my nose) and other book talking behemoths do too. They have their work cut out for them. Goldman was great on their call to exit commodities, but so far have dropped the ball on their reentry call. They should have quit while they were ahead (see Meredith Whitney).
What is funny about trading and investing is that we tend to hear what we want to hear. Last year when David Tepper went bullish (basically said the Fed was the silent bid underneath the market) we fell at his alter and bought with both hands. A couple of weeks when he came out cautious, I heard crickets. So smart money works for us when we want it too, but not when it becomes a nuisance. Interesting dynamic, also human nature.
Good luck the rest of the week and get your watch list ready, you don't want to be a deer in headlights when this thing turns higher. It always does. Oh by the way, don't believe a word you hear coming out of Europe. They're trying to nail jello to a tree over there.
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