fbpx Bulls struggle to hold on | Option Strategist

Bulls struggle to hold on

By Lawrence G. McMillan

The last two weeks seem like they took two months. It’s hard to believe, but two weeks ago, the Standard & Poor’s 500 was near the high end of its range, with positive technical indicators, and an upside breakout seemed a possibility.

The bad news started with the political deadlock over the debt ceiling accord. And, when that was finally solved (or was it?), the market looked at the spate of poor earnings reports and bad economic data and just kept on going south. In the ensuing drop, the technical picture changed completely and severe oversold conditions developed. This leaves the market in a precarious position now, and the bulls are struggling to hold things together.

The chart of S&P 500 looks more or less like a trading range if you consider only closing prices. However, if you consider intraday prices, there is now a pattern of lower highs and lower lows — the hallmark of a bear market. Moreover, SPX has fallen below the 200-day moving average by a significant amount. That isn’t one of the moving averages that we utilize, but a number of large institutional traders use it as a long-term frame of reference. When SPX is above the 200-day, they want to be long, but when it’s below – as it is now – they want to be out...

To read the full article, subscribe to The Market Watch Options Trader.

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.

-->