After falling 35% from February to March, the S&P 500 has rallied back considerably as many states have reopened their economies. Today, we're only about 10% off the all-time highs made before the coronavirus shut down much of the world economy.
But some states are already scaling back their plans to reopen as the number of new COVID-19 cases are spiking.
That's a real risk for new traders who've been making easy money on this rally since March...
Take Barstool Sports Founder Dave Portnoy as a case in point. He gullibly thinks stocks only go up forever. He's built a following as fans watched him day trade over the last three months (because he can't gamble on sports).
That could get his followers in trouble as they follow him over a cliff. That's why we're listening to the actual experts.
Money Morning Quantitative Specialist Chris Johnson has been building proprietary trading models since the 1990s and has guided his readers to 70 double- and triple-digit winners in the last year alone.
Chris knows, like anybody else who's been investing long enough, that nothing goes up indefinitely.
And during his Markets Live appearance yesterday, Chris made the case for why he thinks we're close to a tipping point.
A tipping point that could turn stocks over and send us to new lows...
How to Know When Stocks Will Fall
Chris is closely watching two market indicators to see if stocks will break lower.
First, he's looking at the S&P 500's support level.
Technical analysts find support and resistance levels on stock charts, where a pause or reversal of a trend would most likely occur.
Chris pinpointed 3,000 as the S&P 500's current support level. If we see a dip in stocks again soon, that's the price where we expect to see buyers step in and give the market a boost.
But if that doesn't happen and the S&P 500 falls below 3,000, Chris thinks we could soon be heading to retest the March lows...
The second indicator Chris is watching is the CBOE Volatility Index (VIX).
Also knows as the "fear gauge," the VIX measures market risk and investor sentiment in real time.
The higher the VIX goes, the more "fear" investors have in the market. And the faster stocks typically fall...
Investors, research analysts, and portfolio managers look to VIX values as a way to measure market risk, fear, and stress before they make an investment.
And Chris thinks that if the VIX holds above 35 for a couple days in a row, that would be the second sign that we're at another tipping point - and a swift drop in stocks could soon be next.
What to Watch Tomorrow
Tomorrow, Chris will be narrating the Markets Live morning report again at 8:45 a.m. EDT.
So, be sure to catch him right here to find out if the S&P 500 is finding support, if the VIX is breaking out, and what to do in either scenario.
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