Failure At 2,800 Spells Doom For The S&P 500!

Philip Davis profile picture
Philip Davis


  • We're teetering on the edge of a 5% additional drop in the indexs.
  • A review of the lines we're watching.
  • 5 ways to hedge for the next 5% drop.

This is not good!

The only reason the S&P 500 is holding the 200-day moving average at 2,776 is because the 200 dma keeps sinking. That, of course, is also pulling the 50 dma lower and once it comes down we're only a month or two away from a "Death Cross" and then we would be looking at a very long, very hard climb back for the senior index.

That's why it is very, VERY important that we finish the week back above the 2,800 line on the S&P and the 1,500 line on the Russell and the 12,500 line on the NYSE and the 25,500 line on the Dow and the 7,250 line on the Nasdaq 100. Anything less than that is DOOM!!!!

While we are pretty well-hedged for DOOM!!!! we did add to our hedges yesterday and we'll be adding more hedges on Friday if the indexes don't perk up and get back to their levels which, though nowhere near a recovery, would at least indicate that there is SOME buying interest still out there - something we're beginning to doubt. By all indications, it does look a lot more like we're consolidating for a move down - rather than a move back up:

Of course, that's why we have our bounce lines - they let us know whether a recovery is real of if it's just a dead cat bounce on the way to the next lower band. The lines we've been using all month are:

  • Dow 25,200 is the 5% line and the bounce lines are 25,450 (weak) and 25,700 (strong)
  • S&P 2,860 is the 5% line and the bounce lines are 2,875 (weak) and 2,890 (strong)
  • Nasdaq 7,475 is the 5% line and the bounce lines are 7,540 (weak) and 7,605 (strong)
  • Russell 1,550 is

This article was written by

Philip Davis profile picture
Philip R. Davis is a highly respected options trader, entrepreneur, and founder of, one of the most influential stock and options trading sites on the web. With over 20 years of experience in the financial industry, Mr. Davis has earned a reputation as a trusted authority on options trading, equities, and macroeconomic trends. As the creator of Phil's Stock World, Mr. Davis has built a vibrant community of traders and investors of all levels, providing them with unparalleled insights, analysis, and trading ideas. Whether you're a beginner or a seasoned pro, Phil's Stock World offers valuable resources that can help you navigate the complexities of the financial markets and achieve your investment goals. With a unique approach to teaching the art of options trading, Mr. Davis and his team of expert contributors including Optrader, Sabrient, Income Trader, Trend Trader, and Warren the Trader AI provide members with live chat sessions during trading hours, real-time trade alerts, and in-depth technical and fundamental analysis of hundreds of stocks. In addition to his role as an options trader and financial guru, Mr. Davis is a serial entrepreneur and founder of several successful companies, including Accu-Title, a real estate title insurance software solution, and Personality Plus, a precursor to He is also the President of Delphi Consulting Corp., an M&A consulting firm that helps companies of all sizes obtain funding and close deals. With his unique blend of wit, humor, and financial acumen, Mr. Davis is a sought-after speaker on options trading and financial markets. His writing style is both entertaining and informative, providing readers with specific and actionable trade ideas, as well as deep insights into the macroeconomic forces that drive market trends. In short, if you're looking for a trusted and experienced options trader and financial expert, Philip R. Davis is the real deal. Join the growing community of traders and investors at Phil's Stock World, and start profiting from his insights and analysis today.

Disclosure: I am/we are long CAKE, DXD, GCI, INTC, M. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Positions as indicated but subject to RAPIDLY change (currently mainly cash and an otherwise slightly bearish mix of long and short positions - see previous posts for other trade ideas).

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