In a twist on I fought the law and the law won, we fought the rat and the rat lost! More on that later!!
IBM, Intel, Google, Caterpillar and Honeywell all report earnings as the VIX is perched slightly above its 200-day MA…the same 200-day MA that held as support in October and December. This most recent test of the 200-day MA almost broke through to the downside but failed to show much conviction and the danger is rising that support will be held again.
At Stock and Option Trades, we have been keeping a very close eye on the 1325 level for the S&P 500. If we disregard the panicked spike down in January, the 1325 level was quickly regained in January and held through much of February. Indeed it wasn’t until March that the old support level turned into a resistance level. This month that old resistance may well turn into support again and we believe that the next 24 hours will prove crucial.
We mentioned over previous weeks that we expected a surprise bearish dip and last Friday that occurred. Our internal models project strength over the next couple of weeks in the markets assuming the 1325 level can hold so Tuesday will be a very important day and we’re looking for anything above that key threshold level to signal high likelihood of a bullish follow through to the end of the month.
The NASDAQ moved too far too fast to the upside in late March and it was no surprise to see the doji followed by a reversal pattern bearish in April as predicted. The likelihood now is for a resumption of the bullish trend for a couple of weeks, starting either Tuesday or Wednesday.
The oil service holders index has had a phenomenal run since late March and, in our view, is overextended at these levels so we would be steering clear of any bullish plays at this point in time because the risk-reward ratio favors a pullback in the next day or so.
We hope that you have found all the efforts we have been making to improve our algorithms have paid off. Our models have been very accurate in navigating some of the choppiest waters out there over recent months and we’re looking forward to continued success in this volatile Year of the Rat! So far, we fought the Rat and the Rat lost! We’ll continue to work hard to bring you informed commentary and winning trades.
Have a fantastic week!
Stock and Option Trades
