Where to from here on the S&P 500?

After an impressive run of late we starting to hear whispers of pessimism from market participants over whether the S&P 500 can in fact hold itself strong and continue this run until the end of the year. The rally which materialised does feel like a squeeze so emphasis should be placed on levels the bulls are able to hold. If they can hold significant levels then it would certainly be a big plus for them to year end if not we could begin to see price tap down to the lows again.

The guys over at See It Market published some great analysis by a regular Paban Raj Pandey , otherwise known by his twitter handle hedgopia in which he presents his case on the probabilities of lower levels to be seen. In his post he shows the level of short covering that has marked an increase in market volatility and says that the measure to look out for will be for the period between 1st October to the 15th October for further clues.

The big take away for me from this post is the amount of short covering or lack of has been experienced thus far and given such a momentous rally you'd think that a significant portion would have been chased away but this doesn't seem to be the case with many still remaining skeptical of higher price moves for now.

New Post - "Is It Time To Short The S&P 500 For A Trade?" http://t.co/1TpIakPLaK by @hedgopia $SPY $SPX $ES_F pic.twitter.com/sGkJPFDll4

— See It Market (@seeitmarket) October 12, 2015

However market commentator Adam Johnson weighed in on the matter by expressing his view that with that amount of short coverage it does open up potential for an even bigger squeeze. This could happened provided the bulls are able to beat some tough resistance that stands in their way after the selloff we saw. 

Doubters Net short position in $SPX E-mini futures now the largest since Oct 2011 per CFTC data Sets stage for potential short cover pop

— Adam Johnson (@AJInsight) October 12, 2015

An interesting way to look at it would be to compare previous years performance with the current year's which is what Ryan Detrick has done. Something I want to point out again, the price moves that have occurred have set new records going back 4 years, so the year 2011 keeps appearing in most commentary with this analysis no exception. The standout characteristic between 2011 and 2015 is both exhibited the same type of selloff at round about the same time.

Ryan believes that the chart imitates the S&P 500 in 1998 which there is no argument about. But look closely at the bottoms of both 1998 and 2011, they each registered a low in October and from there it was all upwards till the end of the year. We now 80 days away from year end and things are starting to look interesting and I believe we might be in for something special.

$SPX in 2015 looks a lot like 1998 and 2011. '98 gained 25% the rest of the year. '11 gained 5%. $SPY pic.twitter.com/PgnUOp50e4

— Ryan Detrick, CMT (@RyanDetrick) October 12, 2015