Over the last few months we have had 3 different occasions that we had a pullback of 3-5% before we went higher. Why should this time be any different? Well I could think of a few reasons, but in percentage terms I think its a great time for fund managers that did capture this move to take some profits off the table. One concern that I have is that volatility levels are lifting a bit, which means bigger moves one way or another. And for delta neutral traders, big moves will kill a good month. The $VIX the last couple weeks has been building a pretty solid base around 23-24, now a move to the 29-30 level I think is a good place to get short vega.
Below is a chart of the $SPX, and we are approaching a support level of 1040. A break of this level would make me believe that 1010 is the next level to watch. I was on the phone this morning with my dad that follows the markets and trades a bit, and he told me that on CNBC a technical analysis guru was on this morning and made mention to the rising wedge pattern the $SPX is forming. As I have said in the past the market can not and will not pay off everyone, and if this pattern gets more talk it probably will not play out. Be cautions of this pattern, it is considered to be bearish with volume trending downward throughout the formation. The volume will spike if price breaks through the up trend line. I would not plan for this pattern to play out just be cautious in case it does.


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