Today we saw something that was interesting, but not altogether unexpected. I stayed out of the market today because I wasn't completely sure that today would be the turn. That was prudent, I would have lost a fair amount of money. However, today further ingrained in my mind that this is the top.
The market broke the little resistance at 1145 on its second try of the day, and proceeded to flirt with the line all day. It didn't reach the golden 1150 level, but puttered along in the 1140s. The market has risen up into the upper 1140s as I expected it would this weekend, and now this is the end. It may go up or down a little bit for the rest of this week, but I'm betting on a significant correction starting this week or next. Here's why.
For starters, the S&P RSI and stochastics have topped out. The RSI is so close to 70 that it would be astonishing to see this continue upwards for more than a few days. Also, the stochastics have rolled over and are going from the mid to the low 90s, even though the market is going up. This suggests that the price movement is unsustainable. The market has reached a huge resistance level and is showing little strength in breaking it. Also, trend lines drawn along S&P tops over the last year suggested that this market peak would fall horizontally to the last one; right at 1150. The volatility index also has turned. It went up over 3% today, and went up both of the last two days. This suggests that although the upswing has continued this week, investor confidence in its sustainability has gone way down.
In conclusion, the market looks poised for an unsuspected and large correction over the coming weeks. Look at my previous post discussing support levels to see how far you think it will fall, because I'm not going to speculate on that.
Disclosure: I am long SPXU, the -3x S&P ETF