It was just two weeks ago when the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) made a new all time high of $199.06. Since that time, the market has begun to roll over and that milestone seems like a distant memory for the bulls. The volume has definitely picked up and the selling is starting to make people nervous. So is this the big correction we have been waiting for? Or is this just another buy the dip opportunity for traders and investors? Well, it might be a bit early to tell if this is the long overdue correction, as the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is only down a little over 3%. However, a few key leading sectors are starting to under perform, such as the Transports, Energy and Semiconductors. These sectors have been some of the pillars of strength for the markets during this historical rise. Now, I do not want to take away from their importance in terms of dictating market direction, but I will look to the charts and I see something much more powerful. If you look at the chart below, you will see that I have drawn an up sloping trendline for the SPDR S&P 500 ETF Trust (NYSEARCA:SPY). As you can see this line has acted as amazing support, and basically been the best time to go long equity markets. So if that wasn't reason enough for you to think this line was important, then consider this. When the S&P 500 broke out above its 2007 high of 1576.09, the retest of the breakout found support at this very trendline, and has had a steady rise since. If we are in the midst of a correction then you MUST have this line on your chart because there is aproprietary technique that tells me that a break of the line could turn very ugly, and massive selling could ensue. There is even a chance that these markets head all the way back to the 1576 area on the S&P 500. So while you will hear a bunch crap on the financial media outlets about where this market will go, I say just look to that trendline for the all you need to know! For live market insight and alerts exactly when we enter and exit positions on trades like the SPY and more... step inside the Elite Round Table and enter profitable trades live with us. You can also join our FREE market moving email list to get free updates ONLY when important action is happening. We look forward to having you join us as we navigate the markets and make money! Parm Mann Elite Round Table Follow me on twitter: @ParmMannTrader Join the Elite Round Table on Facebook
It's starting to look like we'll get another test of the trend line this week. VIX is holding too and looks like it might have moved in a higher trading range. Anyone else feeling this way too? I'm hedging with a Russell short and added on the bounce. It just seemed really soft, and the volume was light.
The vix seems to be "broken", and I'm not the only one who thinks so. It seems to be more of a bearish indicator than an actual volatility indicator from what I've observed. Volatility goes both ways.
There's definitely a bearish skew to it. I think "fear index" is a better moniker, whoever came up with that. I'm still waiting to see if it finds a bottom here before I really load up on the short side, but I feel pretty good about being short the Russell here. It's definitely underperforming even in the upswings, so it feels like a good risk-reward ratio.
