Key Levels on the S&P and Dips to (Cautiously) Buy

Conservative bulls can wait, but there are potential opportunities developing.

Technical Edge — 

• NYSE Breadth: 82% Downside Volume (second 80%+ in a row)

• NASDAQ Breadth: 78% Downside Volume 

• VIX: ~$23.50

Game Plan: S&P, Nasdaq, Oil, OXY, PEP, Utilities

• (There are some great potential setups taking hold)

Closing near the lows on Friday set us up for one of two outcomes: A bounce from active support or a possible “change in tune.” We’re seeing the latter play out as selling pressure again picks up in the market. 

With a little luck and a focus on relative strength leaders, we were able to get another strong push from some of our individual stocks. The dollar — UUP — is back to 52-week highs, while AR got us another trim yesterday (more on managing these, below). 

We are down to just a couple of positions now, and they are running at breakeven or profitable stops. That’s a great position to be in from a stress/position management point of view. 

We’ve had one of our best stretches of the year over the last 6 to 7 weeks. In that respect, I’m very much okay with letting the market reset and consolidate a bit here before rushing back into some positions, although we do have our eye on a few. 

S&P 500 — ES

I’m not surprised we’re pulling back, but I am surprised that the ES knifed through the 10-day and 21-day moving averages so easily, as well as the 4170 level. 

From here, I want to see if we can get a bounce going and how strong it is if we get it. Basically, I want to know if 4170 to 4200 will be resistance or if the bulls can reclaim it. 

It would be classic action to draw in the longs, then deal out a couple of quick declines that “trap” them at higher prices. 

Thought out loud: Could it really be so obvious to top at the 200-day and pull back to the 50% retrace and 50-day moving average, near 3980 to 4000?

S&P 500 — SPY