Given the amount of time we were asked our opinion on the market today, I felt it would be valuable to send our thoughts to you.
Last week S&P Future (/ES) sold off 4.46%. The sell off has been met with significant buy side interest this week with /ES up 1.76% since Friday’s 1290.25 close.
Will this buy side momentum continue?
On one hand you have the completion of S&P Futures head & shoulders pattern measured move as we noted here.
On the other hand you have potential for a ten point upside move to 30.00 in the VIX that we talked about here. Add potential resistance turned support in the 146 area in 30-year Bond Futures (/ZB), and you have two potentially bearish cases for the equity market.
In order for us to feel extremely comfortable on the long side, we need to see the VIX back at 18 and Bonds back below the 145 price level. Until then, we do not intend to add to any bullish positions. If the VIX does in fact reach 30, we will look to enter some bullish credit spread positions as we see it collapsing from that level at the moment.