The action this week has left some pretty good clues the market may have reached a short-term top following Monday’s short-covering rally. Of course, picking market tops (and bottoms) are never easy and trading ranges make that task much more difficult but all signs appear as though the bulls are taking a breather
The “fluff targets” I have given since the beginning of the year: Dow 16,800-17,000; S&P 1,900-1,909; Nasdaq 4,400-4,500; and Russell 1,200-1,225 have now triggered for the most part and the summer will be crucial in determining if much higher levels than this are on tap or not.
In February, I gave my yearend price targets for the indexes but I cautioned then the major moving averages (MA’s) would need to hold across the board. I have talked about the Russell 2000 and Nasdaq being trapped between their 100-day and 200-day MA’s and although one day doesn’t make a trend, 2 or 3 might so the rest of the week will be crucial for the bulls.
I’ve been cautious adding put options to the portfolio all year long and avoiding the traps of a trading range but the portfolio has been filling up with more bearish than bullish plays in recent weeks.
Remember, I am not a bull or bear by heart. I LOVE playing both sides of the market. Most investors and slick-talking pros will tell you to avoid market pullbacks and corrections but this eliminates half your play book. You can make as much money playing the downside as you can the upside so don’t be afraid to go short.
There are a lot of factors moving the market right now and I will cover them in detail tomorrow. For now, let’s go check on our current trades as many of them are seeing sweet gains.
Heading into the second half of trading, the Dow is down 193 points to 16,420 while the S&P 500 is lower by 25 points to 1,863. The Nasdaq is tanking 60 points to 4,040 and the Russell 2000 is declining 18 points to 1,084. The VIX is at 13.56, up 1.39, and is above the 13.50 level I warned about this morning.
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