fbpx The S&P 500 is headed for a breakout | Option Strategist

The S&P 500 is headed for a breakout

By Lawrence G. McMillan

The market had a powerful showing Tuesday with the Standard & Poor’s 500 Index rallying 1.6% for the day. Market indicators suggest a potential 100-point rise in the index over the next few months.

The stock market suffered some heavy selling in the first half of June, thereby creating some contrary buy signals that eventually took place in late June. Those signals have been called into question with the market decline thus far in July, but it appears that bearish concerns are overblown and are just the market’s way of luring bulls out of their positions before a strong upside breakout takes place.

I usually follow four major indicators, two of which are heavily oriented toward options and two of which are not. The first is merely the chart of the Standard & Poor’s 500 Index. It is the ultimate arbiter, in that price is always correct, no matter what other indicators might say.

There is some legitimate debate as to how one might interpret the S&P 500 chart: Is it in a wide trading range between 1,260 (the March and June lows) and 1,360 (the “Bin Laden” May highs), or is it bullish because there now is a higher low coming off the June lows, and the 20-day moving average is rising?

I favor the latter, but we’ll know for sure in a short while. If the S&P can exceed the 1,355 highs, then we’ll have a pattern of higher highs and higher lows, and that would activate targets in the 1,425 neighborhood or so. However, a close below Monday’s lows at 1,295 would negate that bullish picture.

Read the rest of the article at Marketwatch.com

Share this

Option Strategist
Blog Search

Recent Blog Posts

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.

-->