$SPX broke down on Monday, September 20th, violating several support levels, including the very important one at 4370. A gap was left on the chart at 4430. In a truly bearish environment, further selling would have followed. Instead $SPX has risen, filled the gap, and closed back above 4430. In addition, several buy signals were registered (although to be fair, there are still some lingering sell signals as well).
As is so often the case, everyone wants to sell at once. That happened yesterday, with $SPX down 127 points at one time. But it rallied strongly after 3:15pm, and continued to rally overnight. We’ve seen this story before: the one day wonder bear market followed by another month of rising prices. Somehow, that seems all too convenient, but it could be happening again. Let’s work through the indicators, which are all over the place at this time.
After making a new all-time high on September 2nd, $SPX has failed to add to the gains. Perhaps the sideways movement is all the correction that this market needs, similar to what we saw at the end of July. Regardless, the $SPX chart remains bullish in that it is above support and all of its major trendlines are moving higher.
Join Larry McMillan as he discusses the current state of the stock market on Monday, August 30th, 2021.
Join Larry McMillan as he discusses the current state of the stock market on Monday, August 23rd, 2021.
Join Larry McMillan as he discusses the current state of the stock market on Monday, August 16th, 2021.
Join Larry McMillan as he discusses the current state of the stock market on Monday, August 2nd, 2021.
One of the tougher choices an option trader faces is what to do with a profitable position. That’s a good choice to have, but it might not be an easy one. Our philosophy is always to let profits run. Therefore we use trailing stops, not targets. Targets only take you out of your best positions way before they have run their course. But even within the framework of using trailing stops, there are some choices to be made besides just raising the trailing stop as a long call position gains profits. Specifically, when should a profitable long call be rolled up or a profitable long put be rolled down – if at all?
As $SPX has recovered from its July 19th lows and driven to new all-time highs, not a lot has changed regarding the overall picture. It's still the big-cap tech stocks leading the way, as the NASDAQ- 100 ($NDX; QQQ) and Dow ($DJX; DIA) are near all-time highs as well. But the internals of the market are still weak as manifested in the Russell 2000 Index ($RUT; IWM).
