Sunday, September 1, 2013

Is 1,600 the Next SP500 Support Level?

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Investors and traders alike are heading into the long weekend with a variety of potential risks facing them. The media has made us aware of the situation that is going on in Syria and that the United States may be planning a military strike.

Since the current Syrian situation arose, we have seen some strong volatility return to U.S. financial markets. The observed volatility has included both realized volatility and implied volatility in many of the various option chains. There are pundits who will surmise a variety of outcomes, but frankly no one knows for sure. Will oil prices spike if military action occurs in Syria? Will oil prices fall on a military action(s)? What will happen to gold? What will happen to risk assets? Will they find Jimmy Hoffa?

We have recently received several emails asking these questions. We have answered them all in the same manner. We have no idea what is going to happen in financial markets for sure. Anyone who says they do does not respect the randomness of markets. We can look at option based probabilities for some clues, but there is no definitive answer.

Instead we want to look at a very powerful tool that is available on most trading software platforms. Volume by price is a powerful tool to determine where key levels are in an index or price chart.

Our complete chart work and set ups for the S&P 500 Index are shown here.

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