Where is Support for the Dow?

  • Posted on: June 13, 2014

Above is a chart of June Dow futures:  There are some “what ifs”  under the market for bears looking for breaks.
First Support comes in at 16600. Second T-line comes at 16450 and the Third,  longer term  T-line projects an intersection at 16000.  The high was 16962.  A test of 1600 would be a 5 1/2 percent correction.

I have NO IDEA if we are going to test these levels.  The grind seems to be inexorably higher for the Stock Index’s as money continues to come in every two weeks for folk’s IRA’s.

Until folks have a CD rate return  north of 5 or 6%,    why wouldn’t they keep their money in an investment which historically has averaged 8% return over time?

For now,  the trend is higher,  we are in no man’s land price wise , so everyone from George Soros down to the average man on the street has NO IDEA where the top will be.

So we look for round numbers as targets, because that’s human nature.   we came within 35 ticks of the 17000 mark in the S&P  the high in June S&P was 1954.75   Everyone was talking 2000 as an upside target.  For now, 1950 looks to be the resistance to the top.

Do the math.  A 10% correction gets us to the S&P a downside at 1759
a 10% correction in the Dow gets us to 15,266.  Buying a 15500 put for the next month will cost you 280 bucks.  that’s 35 days of downside.

There are a lot of different strategies with options and futures, but buying a put,  for 300 bucks  is cheap protection,  or a cheap way to profit if there is some sort of panic flush off of the recent record highs.

If you are looking for specific recommendations,  more detailed which fit your risk reward parameters,  give me a call or send me an email.

CER