So where from here? In the tech-heavy, Nasdaq 100, the 2040-2050 range is obviously huge and I suspect that exogenous market forces (Plunge Protection Team) can read the charts as well as anyone else. I am not setting forth conspiracy theories here, as any bear who has listened to Mr. Paulson and Bernanke speak of late would be “imprudent” not to factor the government into the trading equation.
Below 2040, the next stop resides at the 2000 round number.
For the S&P 500, things are a bit less clear with the 200 dma already above head at 1483, and no obvious support areas until the 1425 area (Friday closed at 1453). If the S&P closes below the fulcrum or the midpoint of the summer lows and the October high which is approximately 1474/1475, yesterday's close coincidentally, does that suggest a Black Monday?
However, while prices may be manipulated, the underlying sense of anxiety cannot, and will likely keep the volatility index (VIX)– and by extension option prices – nicely goosed up even if we were to have occasional magical rallies.
Oh, one last thought.., before the madness kicks off: Reacting to prices going against you (except for stop losses) is often a recipe for more losses. If you were not set up for what’s happening right now, there are three things that can be done: buy, sell, but perhaps more importantly, nothing.
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