The oversold signals that have been popping up finally became too strong for traders to ignore and stocks were being bought while they were still “cheap” today. What’s changed? Nothing at all. That’s what we have top be careful of.
The chart of the Standard & Poor’s 500 Index is clearly in a downtrend. It broke through critical support at 1040 last week but managed to finally break back above and closed above that level today. If this rally gains traction tomorrow we wouldn’t be surprised to see a test of resistance way back up around 1090 this week. However if tomorrow brings us bad economic news, we could very well see 1020 again this week. We have to remain cautious.
Keep in mind that all trades should be viewed in extremely short timeframes until we get through this choppy and dangerous period. Keep your eye on 1020 and 1080 on the SPX. A break above should be a green light to step-up our buying. Also watch the VIX which is giving the green light to add long positions, albeit for the very short-term.
Weekly Economic Calendar:
- Thursday brings weekly initial jobless claims. International Speedway Corp. (NASDAQ:ISCA) will report earnings.
- There are no major economic reports scheduled for Friday. PriceSmart Inc. (NASDAQ:PSMT) will report earnings.
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Disclosure: No positions