S&P 500 Look Out Below!The last time the RSI moved down to 38.52, briefly moved up, but returned to 38.52 was near the end of 2015. The index dropped 9.75% from the close on December 18th of that year to the eventual bottom. A 10% correction occurred by the time the bottom was found from the its most recent high.
We are more than aware this bull and rally is due to correct. Is it finally upon us? Today the RSI repeated the movement mentioned above. A similar 9.70% drop from today's close would bring the index to around 2195. The index made its last record high on August 8th. A 10% correction from 2490 would be around 2242. If we repeat the 9.75% drop as previously mentioned, this will clearly be a 10% correction for the index.
Not so fast! Before 2242 or 2195 can be met, there are other stronger levels of support that must be breached first. My first level of focus is at 2401. If the index breaks below this level, we are on our way to the next major support level at 2310. Only when 2310 is breached should we consider continued movement to the aforementioned 2242 and possibly 2195 levels.
In my opinion, valuations are high and overall EPS is meager. I have been a bear for over six months which has kept me away from major gains. However, I have not lost anything as I laid in wait. You only take losses when you close your positions. If you miss out on a rally, but did not enter it, you lost nothing. I have been waiting for shorting signals, which I believe are finally seeing the light of day.
I have puts on SPY and QQQ, while buying calls on the VIX when it was trading sub-8. The VIX could only go one direction when it was below 8. All of this waiting is finally paying off. Will it pay off for you?
