The Day Traders Journal
September 11, 2016
September 4, 2016
Greetings fellow investors - As we indicated last week the odds of a rate hike were actually higher than the market was pricing in as the recent strength in the financial sector was hinting at higher bond yields worldwide.
Japanese & German 10 year yields have been testing recent highs while utitlities & telecoms were beginning to under-perform the market which is usually an early sign of bottoming bond yields, confirmed by the surge in the oversold CBOE 10 year US Treasuries Yield jumping nearly 5% on Friday as it found support near last years lows.
My message from September 4th indicated that support in the S&P 500 would be found at 2125 and the market closed just 2 points above that critical support level, also adding to the carnage was over 900 million dollars in "Sell at Close" orders on the trading floor implying nervousness of retail investors & composite operators (CO's) alike.
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Although "buying the dip" has worked for several years now as of Friday that methodology did not play out well as the S&P 500 stocks sliced though support levels and quickly tested the near term support near the 2125 to 2100 level in the S&P 500 that we shared with readers last week with a likely test of the widely followed 200 day moving average around the 2057 level (38.2% Fibonacci support) likely coming to fruition before the selling rout begins to subside as we enter the most tenuous months for the stock market during September & August, historically challenging months for investors worlwide.
Investors should also be on the look out for additional support levels at the 2002 (50.0% Fibonacci) and the 1957 (61.8%) Fibonacci support levels as well should the likely bounce at the 200 - 250 day moving average fail to hold (2057 - 2050), although I suspect the S&P 500 will initially find support & bounce at this widely followed moving average although it is entirely plausible that a deeper correction may ensue should the (38.2%) Fibonacci support level around this widely followed moving average fail to hold. Watching how bond yields are reacting at these levels will be an early indication of bond traders sentiment confirming a near term floor in equities.
Above is a chart of the VIX , a break above the yellow line around 20.8 generally signals higher volatility ahead - Investors should keep a cautious eye on that price level.
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