MarketClub Trade Triangle on the S&P 500

The market saw a fair amount of selling yesterday, which accelerated heading into the close. Volume was high, which is an indication of institutional selling. The Nasdaq sank 1.2%, the NYSE composite and S&P 500 dropped 1.4%, the DJIA fell 1.1%, and small caps fared the worse, with the S&P 600 shedding 1.8%. One bright spot was that leading stocks seemed to be holding up.


This morning, the bulls have regained some of the ground lost yesterday. The overall market remains in a confirmed rally, but I am questioning how much additional upside we'll see this year. If you look at a chart of the S&P 500, we made a high in June of 1,540 and have now been turned back twice since then. The inability of the market to make a new high does not bode well for further price gains.

However, notice the bottom of our current range. As this formation tightens up, it will likely break out. The question is whether the breakout will be to the upside or downside. You will get differing opinions on this. Some favor the prior trend. The fact is that it can go either way.

My options portfolio continues to maintain a bullish bias, but I will be keeping a close eye on things going forward. A range bound market is good for me, as I can continue to pull in short options premium. However, if we see a downturn, it will be time to pull back on those positive deltas and consider a more bearish profile.

Good trading!

Christopher Smith
TheOptionClub.com