MIXED SIGNALS

The market gave out a few more mixed signals today. Things started out looking very bullish as the market began the day lower, but soon rallied up into positive territory. The SPY looked like it might end up having a bullish engulfing pattern, but it failed to close above Friday's opening price. The DIA did have a bullish engulfing pattern, but the Nasdaq was far from it. The volume today was very light...suggesting that this rally is simply a counter trend rally (retracement) and the downtrend should resume shortly. That said, I think that the price action today was strong enough to allow for another day (or two) of upward movement. We're still a decent distance away from the 50 day MA. A few more rally days could ease the oversold condition of the market and allow for another sharp move down. I still think we will hit the 1250 area on the S&P 500. It's just impossible to tell exactly when that will be. The VIX moved down quite a bit today which also suggests that we could get a few more bullish days. If you haven't been stopped out of your put option positions, you might want to consider rolling the July options out to August to give your trade more time. You could also consider stopping out and re-entering later on if you feel like the rally could go up further. To roll out your July options, you simply sell the July's and buy the August's. Same strike prices. Most platforms will allow you to do it on one order form. Keep in mind that it will cost you a bit more to buy the August options (you have to pay for the additional time). Don't roll them out unless you feel that the market will continue to move down. There is a lot of uncertainty in the market right now which is why it has mostly traded sideways for the last 6 months. I don't recommend that you try to play this recent rally with calls unless you have a lot of experience with short term trades. Some stocks like CAT and WYNN could have short term bounces. They are both good companies that are very overbought and bouncing off significant support levels. Most of you should wait to see if this rally fades, then look to buy puts for the expected move down later on. This is what I will be looking to do. Those that still have OIH puts should start to take profits on that trade. The OIH has made a pretty big move down since it was recommended a few weeks ago. Don't get too greedy. There is some support here at $140 and it could rally up a bit.