For the S&P, the key number for me is 1299 on the cash index. That is the 23.6% Fibonacci retracement of the move from May 31st. This is a key area because the S&P has been so weak that it has failed to retrace even this minimum percentage since 5/31. If it fails again, watch out.
That was my take yesterday morning. The S&P never made it to 1299. The result was ugly. And it started well before Bernanke started speaking.
Over night, an interesting thing happened though: there was a bounce that hit a 38% retracement before it rolled over to new lows. Now the futures are bouncing, and have blasted through the 23.6% level -- an early heads up. So I'll be on the lookout for more of a bounce in the day session on the cash S&P index. In my opinion, that's what really matters.
The lows of the prior two days will be overhead resistance (about 1284.50) -- notice the over night futures high at 1286.25 coincides closely with that.
The headline of today's post should really be called "acting in the face of complacency, which is dangerous." There still has not been a material rise in the VIX. So I'm not looking for a lasting low. It seems that market participants have not had the living daylights scared out of them yet. That could well be around the corner still, but my read is that a near-term bounce will happen first.
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