Since the December 26th low in the major U.S. equity indexes, the odds have been in your favor to look for long trades.
Now, however, it’s time to get defensive.
The QQQ and DIA have rallied back to their mid-December breakdown levels, and the SPY has come just short of the same.
Additionally, the VXX has pulled back to its respective breakout level.
Finally, the market has not had much of a pullback since the Dec. 26th low.
Add it all up, and you have a strong bounce in a bear market to a major resistance level.
The market doesn’t have to sell off, but it’s likely to try. If that attempt gets any downward momentum, it could get ugly. Here are the key levels to watch in the indexes.
Those levels should be short-term support. If the markets trade, and especially close, under those levels over the next few days, then steeper declines could follow.
Rick Nartarian, Chief Investment Officer
The American Investor Daily