SPY Will Test the 100-Day MA – Be Patient – Great Buying Opportunity Setting Up

September 26, 2014
Author: Peter Stolcers, Founder of OneOption

Posted 9:45 AM ET - If my comments are helping you make money, please CLICK HERE and post a review on Investimonials. Yesterday, the market pulled back sharply and the low from Tuesday was breached. The SPY is likely to test the 100-day moving average ($195) in the next few days. Analysts came up with dozens of reasons for the decline (Russia rumored to seize foreign assets, weak growth in Europe, durable goods orders fell sharply, subway terrorist threats and the Alibaba IPO). From my perspective, bullish sentiment was too high and speculators are getting flushed out. Durable goods orders fell dramatically, but when you strip out transportation, they were up .7%. This is a very volatile number and it is usually ignored by the market. This morning, GDP came in at 4.6%. That was much better than expected. Next week, we will get an onslaught of major economic releases (ADP, ISM manufacturing, official PMI's, ISM services and the Unemployment Report). Europe will be weak, China will be okay and the US will remain strong. The ECB meets next Thursday and analysts are expecting them to ease. That will keep a bid to their market. Traders are fearful that the Fed is going to remove the phrase "considerable time" from its statement next month. That means "good economic news is bad news". The market might have a negative reaction to the releases, but when traders see that yields are not moving higher, they will buy stocks. Earnings season is a few weeks away and the bid will strengthen. Nike and Micron posted excellent results last night. The October FOMC meeting, the debt ceiling and HMO premium hikes will provide a small headwind for the next few weeks. Once support is established, an excellent buying opportunity will present itself. This dip is the move we have been hoping for. We have broken out of the range and the trading environment is improving. If you are a nimble, you can stick with your short positions for a few more days. Know that you are playing with fire and use stops. Set your target at the 100-day moving average. I am not buying puts. I am day trading based on the momentum after the first hour of trading. After a big decline yesterday, the damage should be relatively contained today. Swing traders, be patient. The SPY will test the 100-day moving average, it will be breached and the market will bounce. Within a day or two, we will retest that low. If support holds, BUY CALLS. The market is likely to probe for support early this morning. If it holds, we will trade in a fairly tight range and finished a little higher for the day. If the market makes a new low after two hours of trading, we will drift lower. . . image

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