Hey Traders,

Over the weekend I was asked the same question about 15 times:

When is it time to buy?

This question confirmed what I already thought … the market is still going to go lower.

People are on the sidelines not out of fear, but out of hope …

They remain ready to pounce …

There is still optimism about the market …

When the optimism fades that is going to be the time to buy.

When people give up hope …

So where is that going to happen?

I have 3 major levels I am watching in SPX:

The 1st level I am watching is 3600 which was the high in September of 2020, its resistance but not huge.

The next one is big … the pre-pandemic high, which lands at just under 3400.

That is a spot where I might start to dabble, depending one the mood of my neighbors (if they are still hopeful … I’ll pass).

The final level and I think this is a key one, the highs from 2018, these are around 2900.

At 2900, I am probably really willing to dig in, that would represent wiping out the run up leading into the pandemic as the FOMC was still keeping rates at insanely low levels.

Another key thing I want to see is the dollar.

The dollar has been so strong for so long, we are not going to rally until that lets up:

UUP is up 20% year over year and does not look like it’s letting up.  A true break below the 50 DMA and frankly the 200 DMA would be a positive sign that the market is going to go higher.

The last is AAPL … the ultimate safe haven and hedge fund hotel.

When AAPL finally cracks and truly falls apart … and I am talking about 100 dollars a share or even lower … that will be a good sign the end is near … Why?

Because it means funds are liquidating AAPL to pay redemptions.

So when that happens what will I buy?

I will use options on SPX.

I will sell puts at the 2000 level and the 2500 level,  and I use the dollars to finance calls.

For those that don’t want to mess with options … I would look to buy RSP,  the equal weighted S&P 500 index ETF.

Your Only Option,

Mark Sebastian

Founder & CEO
Option Pit