Tuesday, October 14, 2008
So before I go into where I think the markets are going into midweek, let me just ask the monkey on his thoughts of a market rally.
Lol, well unless you go to that site then you have no idea what I'm talking about. Anyway, the rally monkey is always right and kudos to Adam at Daily Options Report for bringing it to everyone's attention one day before the biggest rally known to man.
Ok, seriously lol, not a slam dunk that we get a sustained market rally into the end of week but one thing could be pointing in that direction. Its options expiration of course, and that means the moves can be exaggerated to a degree. On these weeks I tend to see bullish action and the end of week moves follow the early week's to some extent as we watch the option shorts and longs battle it out for positioning. Options ex is notorious for whipsawing traders out of their positions so I would expect a choppy market these next few days with volatility abound.
As for levels the SPX opened up on steroids this morning as the futures were literally trading around 1060 (we were at roughly 860 on Friday morning to give you some perspective). We got a nice little selloff after the open but seemed like we wanted to hold the 1000 level and we did. Until about 1:30 pm ET. That's when I saw a bear flag developing on the 15min chart of the futures and got the signal to go short the market. It worked out well as we then dropped to nearly 975 on the futures before recovering most of that retracement by days end.
So overall, I would interpret this as constructive profit taking, and we didnt close near the lows which is always something good. I wouldnt be surprised if we retraced some more of Monday's insanity the next few sessions but as long as this market stays over the 920-940 area on the SPX I would expect this intermediate term snapback to feed upon itself and continue in the coming weeks. Trade safe out there.