For the past year, the one thing that has consistently worked in this market is playing the trend lines. The S&P, DJIA and NASDAQ all bounced right off of their lower trend line today. The QQQQ bounced off $44.26, the DIA bounced right off $99.40 and the SPY bounced right off $104.29. I took a long position shortly after the QQQQ rallied to $44.58. I bought 1,000 September $44.00 calls at $0.90 per contract and unloaded that position at an average exit of $1.05 for a nice gain on the day.
Though I continue to hold a bearish intermediate bias on the markets, I think we could be headed higher at least to test the upper trend line of this down trend. The upper trend line on the S&P 500 sits at 1070, $44.50 on the QQQQ and at 10,250 on the DJIA. However, I definitely do not have enough conviction to hold a long position over night. Potentially disappointing jobless claims can easily push the markets right back down to the lower trend line. One thing is for certain, it is almost comical how easy it is to make money off of trend lines. No one seems to take them seriously, and it gives me quite a massive advantage over the market.
Disclosure: At the time of this writing, the author sits in cash. The information contained in this blog is not to be taken as either a trading or investing recommendation and serious traders or investors should consult with their own registered financial advisors before acting on any thoughts expressed in this publication.