Good Morning Traders,
Just as the 10 day forecast is bleak for snow here in Park City, it looks like another week of options expiration will go out WITHOUT A BANG. I am still pricing in a slight chance of a severe market correction in a short time.
The reasons:
- Since March (9 months) we have been higher than the previous month and we have options expiring on Friday
- At option expiration volatility can pick up
The market has been steady and yesterday the $SPX hit a new high, breaking through key resistance at 1100.00. The trend is still in tact until we have a significant pullback and fail to make a new high (lower high or double top or other pattern) as there doesn’t seem to be a fundamental shift in sentiment or policy (see Bernanke’s comments yesterday).
We have retraced over 50% of the downmove starting in 2007 and with the current trend, a 62% retracement seems likely – putting the $SPX closer to 1200 – quite impressive if you remember where we were about a year ago. PANIC was in the streets.
Have fundamentals changed that much? Is it time to start taking profits off the table (see commodity gains such as VALE or tech gains such as AAPL!) and start to get a little bit neutral with good risk management? Many stocks have gained over 100% in less than a year!
Remember, any investment or trade needs to have reasons for entry, reasons for a stop/target and management throughout.
Happy Trading and Be Environmentally Cool
