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Options Update – 5/23/10

|Includes: JPMorgan Chase & Co. (JPM), SNE

 Not only did the Dow lose 4% last week, it dipped below the psychologically important 10,000 level on an intraday basis on Friday. The Dow is now about 9% below its 2010 high, which was set in late April. Also the VIX is now sitting above 40. Despite Friday’s late strength, the overall technical picture is not a healthy one at the moment.

The key SPX Index did close below 1100 which is not good but perhaps more importantly the index failed to break thorough 1090 on three separate occasions during Friday’s session.  1090 would have marked a 50% retracement of the loss from the previous session.  If we had been able to break above and close above that mark on Friday, we would feel fairly good about this upcoming week.  As it stands we are a bit skeptical of Friday’s rally.  It looked like a healthy dose of short-covering ahead of the weekend that fueled that late rally.

Potential support for the SPX is Friday’s low around 1,055. If this level breaks, another important level would be 1,045, site of the lows in February. Resistance is in the 1,100-1,120 area.

We will continue to proceed with caution and we will be very selective entering into new trades.  Remember, cash is a position.  We remain slightly bearish until we see real buyers step into the market.  

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Disclosure: No positions

Disclosure: No positions