9:00am (EST)
The market had a lackluster Wednesday as the bulls and bears battled to basically a draw. Both sides made advances into enemy territory but trading was tight with the bears scoring a light victory when the closing bell sounded.
The Dow slipped a point to close at 12,213 while the S&P 500 fell 2 points and settled at 1,320. The Nasdaq was off by 14 points and finished at 2,751.
Yesterday was the 2-year anniversary of the stock market lows which were caused by the financial crisis that rocked Wall Street and the world. The S&P 500 is the most widely followed index and the benchmark for fund managers has doubled from its 2009 low of 667.
The rally has been amazing to say the least and this three week pause makes since if you step back and look at the run the bulls have had. However, the flip side of that coin is that look at where the market was.
When the market is stuck in a trading range it’s hard not to be emotional because you want the trend you were in to continue. As option traders, trading ranges are the one thing that we don’t like to see because options are time sensitive. However, you can offset this by using longer-term options. In fact, you can purchase options up to 2 years out. This helps keeping your emotions in check and as long as the story doesn’t change for your positions then it is easy to sit tight.
We mentioned that we expected a dull to flat rest of the week and the action from yesterday’s session backed that theory up. We have also seen higher lows from Monday’s test of 1,300 for the S&P and to a degree, higher highs. However, we did get our first Friday-Monday consecutive down days this past week which was the first time this has happened since early January.
Although the lower closes weren’t that major, we mentioned this because it can sometimes give you clues on if a trend is changing.
The current uptrend during this 2-year bull run started in mid-September and there were a couple of times in November where the market had a lower Friday and a lower Monday, but again, the losses were small and another run to new highs followed.
March options expiration week is usually pretty bullish and we are planning for a rally but we know the headwinds will be strong. Oil will continue to move the market but we are hoping the Middle East tensions ease and the “Day of Rage” on Friday by Saudi Arabia turns out to me a minor demonstration.
Tech could rebound on Apple’s (AAPL, $352.47, down $3.29) new release of the iPad 2 and if the Financial sector can continue to show some strength then we might be working with something. However, if the turmoil worsens and oil moves near $110, and Apple iPad sales aren’t as strong, then next week could be our sign the market has peaked for a while.
Futures are lower as we head to press, Dow futures are off by 59 points to 12,115 while the S&P 500 futures are lower by 8 points to 1,307. The Nasdaq 100 futures are down 15 points to 2,295.
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