FREDAlert!
Volume 4, Issue 1
May 18, 2012
Today’s market action has raised concerns, as SPY is flirting with the 130 area we have indicated should be a stop loss. What does this mean?
First, the problem with a level like 130 during options expiration is that it will often be part of expiration shenanigans. In other words, as we have seen numerous times, the market will close expiration at a round number. This is why we usually do not make hard price projections.
What this DOES mean in a broader sense is that this market is weaker than it should be. If this were a strong market it would have held 134. The fact that we are below our projected range lessens the chance of a strong summer rally. We would not sell on today’s close, unless it is possible to get back in on a close above 130, even if this occurs on Monday. Rather, we would look at the market again on Monday – if Monday is not strong or decent we would then start to liquidate speculative positions.
