Given the 5 day selloff in stocks I thought I'd touch on why the market rebounded today (albeit slightly) as well as what is most likely to happen from here. Obviously markets can only move in 3 directions; 1) up, 2) down, or 3) sideways. The interesting thing is that most of these moves happen between support and resistance of past market lows/highs - and right now we're at one of those critical levels. The video shows this visually, but in a nutshell if the S&P 500 can't hold on to 1,370 this week it is very likely to fall at least 5% more. So we'll keep a close on on that level and issue a warning of sorts should it be necessary.
So long as investors are well balanced, diversified, and only taking the appropriate amount of risk these 10% or less corrections are pretty easy to handle and are perfectly normal. They never feel good - but should never really hurt either. If they hurt it's mostly psychological. The real drops we have to always be on our toes for are "the big ones." The big ones are 20% or greater drops that can take years to recover from. And those are the reasons I watch all the key levels mentioned in today's video.
Here's the video:
Thanks for checking out the post - I'll be back on the blog before the end of the week with an update on whether or not the 1,370 level holds and the repercussions of such should it happen.