by Steven Sarnoff
Corporate earnings beats, particularly in the Dow industrials, are propelling panic buying. Central bank monetary largesse and money moving out of bonds (pushing 10-year yields up), along with investor hopes for tax cut legislation is also juicing the market.
I try to tune out the noise and focus on what the character of the behavior of market price movement is saying. Note, in my daily candlestick chart below, the appearance of a “hanging man” followed by a strong negative black candle just as the venerable index is nearing the apex of a bearish rising wedge pattern. This is telling us that buyers are approaching exhaustion and sellers are poised to strike back.
With SPY trading Tuesday at $256.62, I’m watching key resistance at $256.80-$257.11, basis the close.
Volatility (fear) is as low as it ever gets. Smart traders know that when volatility is absent, you should prepare for its return. We are currently positioned for a coming move lower.
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Best of luck in your trading.