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You've come a long way baby!

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The S&P 500 Index (SPX.X) has gained about 13% since its September 21st low of 945. That's an impressive rally. On September 10th (day before terrorist attacks) the SPX closed at 1,092 so we're getting close to a level where we'd expect some selling.

There were undoubtedly some portfolios that got hit pretty hard after the terrorist attacks and we'd expect some covered call writing or selling of stocks that may find some traders/investors back near the break-even level. Traders that will stick with a discipline of looking for some stocks that showed good relative strength in recent sessions and identify some pullback levels may want to start getting some powder dry (take some profits where gains are there) and get ready to reload.

S&P 500 Index - last six months

Traders will be monitoring the 50% retracement level on the SPX near 1,080. The bullish % for the SPX was back into a column of X's at 24% so we were still "oversold" on a quantitative basis last night. Today I'd expect were going to be back up near the 50% level, but to soon to tell. Traders that understand where we've been and where we are will understand that new bullish trades should have the carry the same amount of discipline as those that were initiated in past sessions that have worked to the traders benefit. Should the SPX pull back to the 1,026 level, it might be nice for a bullish trader to have some powder dry and be able to buy the pullback. Continue to monitor the levels. So far, resistance broken at 1,026 gave the needed upside alert to 1,081 and should now provide a decent entry point for a pullback.

Jeff Bailey
Senior Market Technician

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