The market seems to have bounced back a bit after the drop following the Bank of Japan’s interest rate hike. We’re currently sitting around where we closed on August 2, filling that gap nicely.
SPY resistance levels and targets
If SPY opens up tomorrow or breaks through resistance at 533, I’ll be eyeing 539.43 as the next target, with a potential retest of the trend line around 550. This would be ideal since I wasn’t able to add full short positions during the recent dip.
VIX trends
I’ll be keeping a close eye on the VIX, especially after we saw a breakout over the wedge right before that big drop. Using the VIX for trades has made my trading much more accurate. It is a powerful tool that I highly recommend studying. I might do a dedicated post on it soon.
If the VIX keeps trending down, SPY could melt up toward those target resistance levels. I’m particularly interested in a VIX retest of the wedge breakout around 17.50. If we drop back into the wedge, selling pressure will likely ease, giving us a shot at retesting the highs. On the flip side, if the VIX bottoms at that retest, that’s when I’ll start looking to add more short positions.
Market crash?
Nothing has changed with my thesis on a market crash. The cracks have been forming for the last couple of years, and as we’ve seen, market sentiment can shift quickly. Right now, my focus is on clearly identifying areas to enter short without getting swept up in another runaway market. That’s been a challenge for me over the past year, but I’ve learned from my mistakes. I’ll be putting together a post on risk management soon.