Looking For Next Support Levels

The markets caught folks asleep at the wheel yesterday and took a good shellacking.  After the FOMC meeting, there was little reaction in the markets on Wednesday, and that may have lulled some investors into a sense of complacency.  But on Thursday the rug got pulled out, and the selling accelerated and pushed the major indexes back below their 50-day averages.

Last night Moody's downgraded several banks, but it looks like the news was well telegraphed and mostly priced in.  To wit, the financials are leading the market this morning with the XLF up +0.70% right now.  Energy and materials stocks are lagging again.

One of the culprits for yesterday's selloffs was the steep drop in commodity prices, which makes a lot of global investors fear a slowdown in economic activity.  But we know that some companies benefit from lower commodity prices, so investors should soon start to differentiate and not paint all stocks with the same brush.

This morning there hasn't been a lot in the way of market moving news.  The bounce back in the major averages feels a bit shaky, and if financials rollover later today I doubt the indexes will hold up.

The 10-year yield is higher to 1.65%.  And the VIX really spiked higher yesterday back above 20.  Today it is down -4.5% to 19.15, but I think it will retake the 20 level again soon.

Trade comment:  Traders will now start looking for the next areas of support in the market.  Right now, SPX 1325 has held, but if that gives way many are looking at 1300-1307 again.  Below that the call yesterday from Goldman Sachs was to expect a correction that would take the S&P down to 1285.  But I wouldn't rule out yesterday's selloff bringing out a lot of bearish sentiment again, which could present another rally attempt into quarter end.  I'm just saying--

KAM Advisors has long positions in VXX