9:00am (EST)
When I get to the bottom
I go back to the top of the slide
Where I stop and turn and I go for a ride
Till I get to the bottom and I see you again
Yeah, yeah, yeah…
The Beatles, check that…the bulls were back in business on Wednesday following a strong rally that pushed the market right back into the middle of its current trading range and near key resistance levels once again. Volatility has been extreme to start the month of September which had been all bears but turned on a dime late Tuesday and is now favoring the bulls.
The Dow surged 275 points, or 2.5%, to settle at 11,414. The index went out on its high of the day and easily closed above our 11,350 target. The next area of resistance will be at 11,600 then 11,800. Support is now 11,350, then 11,200-11,000.
The S&P 500 zoomed 33 points, or 2.9%, to finish at 1,198. The index was a stone’s throw from tripping 1,200 and would’ve taken this level out had there been 2 more minutes of trading. If cleared, the bulls have a shot at 1,225 followed by 1,250. Support is at 1,175 then 1,150. More on this in a minute…
The Nasdaq soared 75 points, or 3%, and ended at 2,549. The index opened above the 2,500 level so we figured a test to 2,550 would come on the rally. Tech finished a point below our target but the big hurdle comes at 2,600 (again) which has been a brick wall of late.
We expect the volatility theme to play out into October and the “lower trading range” that has been forming since early August has Wall Street totally confused.
There stills seems to be an even split on where this market is headed. Some pros think we will test new market lows in October, others feel we will be off to the races and the indexes will hit new highs by the end of 2011. Us? Well, we like to play the TRENDS and right now there is no clear trend so we remain neutral. Trading ranges are tough on options and it’s usually best to use a combination of calls and puts when these types of environments are bestowed upon us. However, because the volatility has been so extreme, this still remains an exciting time to trade.
As far as the current trading range goes, we like to track the S&P 500 when it comes to pinpointing the market’s direction so let’s take a closer look at this range.
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As we head to press, futures look like this: Dow (-98); S&P 500 (-13), Nasdaq 100 (-17).
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