The market has rallied for two days on a significant short squeeze from the Thursday lows. Investors were so bearish on Thursday that everybody was leaning to the short side and the Friday rebound caught them off balance. Those that held over the weekend in hopes of a Chinese market meltdown when they reopened from the Lunar New Year on Monday were also trapped in their shorts.
The S&P futures were up more than 20 points on Monday night thanks to a 7% rally in the Japanese Nikkei and a gain in the Shanghai Composite.
Tuesday's short squeeze pushed the S&P to 1,895 and 80 points off the Thursday low of 1,810. The market has gone from oversold to overbought in only two days.
I prefer not to enter new longs just as the S&P approaches resistance. I would also rather not enter new shorts just in case the short squeeze has farther to run.
I am not recommending any new plays today. Let's watch the market on Wednesday and then pick a direction.
NEW BULLISH Plays
No New Bullish Plays
NEW BEARISH Plays
No New Bearish Plays