After spooking us yesterday, the markets are tempting us to jump back in today. SPX gained $35 to close at $1949. RUT closed up $18 at $1146. Trading volume pulled back across the board with 2.4 billion shares of the S&P 500 companies trading today. Trading volume on the NYSE declined 12% and volume also declined on NASDAQ, down 18%. Volatility pulled back with the VIX dropping to 26.1%, down a little over five points.
Let's recap. The closing low on SPX last Tuesday was $1868. Then SPX rebounded strongly, trading as high as $1993 just three days later on August 28th. Just as we relaxed a bit, the markets did what they do best and surprised us with another move lower, trading down to $1914 at yesterday's close, and hitting that close on higher volume - not a good sign. But today, the bulls stepped back in and pushed SPX back higher to a close at $1949. Can we say the correction is over? I don't think so. I will feel much more confident once SPX trades and closes back above last Friday's close $1989.
I think we remain in classic "no man's land" as long as SPX remains between the low of 8/25 at $1868 and the intermediate high of $1989 last Friday. One likely scenario is that we trade within that range until after the FOMC meeting later this month. In the meantime, err on the side of caution; protect your downside.
Is It Safe To Come Out?
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