In the last two days of the week last week, the S & P 500 sold off almost 30 points.? For the week, the S & P 500 was down 26.28 points.
As this was happening, the VIX spiked up for the week almost 19% and closed above 15.63.
This I am sure is not a shock to you because the VIX had stopped at the 12.50 level the prior week.? Actually, the low for the prior week was exactly 12.50.
What we were looking for was the VIX to close above 14.06 for two days and that has now happened.
Having said that, the S & P 500 dropped under the 2,062.50 level on Friday and managed to close above it at 2,065.30.
That suggests the market should bounce from here, with 2,062.50 offering at least temporary support.
The question remains is this the beginning of a bear market?? My feeling is no.
If the market does continue to pull back, I do believe the next pullback would be a great opportunity to buy.
The reason I say this is because the rally off the February 11th bottom covered a distance that was quite strong.
We can watch for indications of a change to a bear market by following the VIX.
A move up to 18.75, which is the active objective would be considered a 'normal' move, if there is anything as normal in the markets.
If the VIX moved up to 21.88 on this drive, and pulled back, then I would expect a deeper pullback in the markets.
So, it does become critical to follow the VIX.
For the S & P 500, a drop to 2,000 would even be considered a normal correction.? If it drops to 1,937.50 and cannot hold that level, then I would expect a deeper pullback.
We are now in the heart of earnings season and companies are having large swings off earnings.
This week PCLN reports and Alibaba.We will also hear from REGN, DVN and TSO.
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Friday is the release of the Non Farm Payroll at 8:30 EST.? That is the big marketwide event this week.
Finally, Wednesday at 12:00 EST is our webinar.? If you have any topics you would like me to expand upon, please email me at davismdt@gmail.com
Here are the key levels for the markets.
VIX:
Major level - 25.00
Minor level - 23.44
Minor level - 20.31
Major level - 18.75
Minor level - 17.19
Minor level - 15.63
Minor level - 14.06 *
Major level - 12.50 *
As I mentioned, the VIX has had two closes above 14.06, so the active objective should be to 18.75.
17.19 is minor resistance. Minor support is still at 13.28.
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S & P 500 Cash Index:?
Major level - 2,125.00
Minor level - 2,109.38
Minor level - 2,078.12 *
Major level - 2,062.50
Minor level - 2,046.88 *
Minor level - 2,015.62
Major level - 2,000.00
2,066.40 is a minor support level.? If the S & P 500 can get above that level, look for it to act as support.
2,078.12 should offer some resistance.? But, if the S & P can reclaim this level, it should move back up.
Nasd 100 (QQQ):?
Major level - 112.50
Minor level - 111.71
Minor level - 110.16 *
Major level - 109.38
Minor level - 108.60
Minor level - 107.03
Major level - 106.25
Minor level - 105.46
Minor level - 103.91
Major level - 103.13
104.69 is a key level for the QQQ.? For it to head lower, that level will have to be violated.
Also, for the QQQ to move down to 103.13, it will need two closes under 105.46.
TLT:?
Minor level - 132.03 *
Major level - 131.25 *
Minor level - 130.46
Minor level - 128.91
Major level - 128.13
Minor level - 127.35
Minor level - 125.78
Major level - 125.00
The TLT did close above 128.91, so the TLT should retest the 131 level.
Support should be at 128.13.
GLD:
Major level - 125.00
Major level - 121.88
Minor level - 121.10
Minor level - 119.53 *
Major level - 118.75 *
Minor level - 117.96
Minor level - 116.41
Major level - 115.63
Minor level - 114.85
125 is within reach for the GLD.? I do expect a pullback at around that level.
Lower levels should continue to act as support.
XLE:
Minor level - 69.53
Major level - 68.75
Minor level - 67.96
Minor level - 66.41
Major level - 65.63
Minor level - 64.85
Minor level - 63.28
Major level - 62.50
Objective should be to 68.75.? And lower levels should continue to act as support.
Apple:
Major levels for Apple are 106.25, 100, 93.75, and 87.50.
Apple closed Friday at 93.74, just one cent under the KEY 93.75 level.
If it closes under that level today, I would expect a move down to the 75 - 81 area.
Watch list:
Bullish Stocks: AMZN, LMT, BCRm ULTA, BDX, CLB, RTN, LLL
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Bearish Stocks: CMG, AGN, BWLD, AAPL, PRGO, TGT, VRSK, SWKS
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Be sure to check earnings release dates.
