The Market Is Trying To Breakout – Buy At SPY 130 and Trail A Stop!

August 8, 2008
Author: Peter Stolcers, Founder of OneOption

There is no real explanation for today's rally and yesterday's losses are simply being erased. The underlying theme is that macro economic conditions continue to deteriorate and the market is rallying from an oversold condition. Global interest rates have been on the rise and that pressure has eased as commodity prices retreat. On a short-term basis, this is good news. I use the phrase short-term because the decline in raw materials is related to a slowdown in international economic activity. In today's chart, you can see that a short-term trend has established itself. The SPY is above key support at 126 and the bulls are leaning on that support level. If the market can break out above SPY 129.50, it has a chance to generate a short covering rally. As I mentioned in yesterday's commentary, the week ahead looks like it will be fairly quiet as traders take time off. There are not any major earnings or economic releases and I expect choppy price action. I have pared back the Daily Report watch lists and the stocks in each are relatively strong/week. If the SPY breaks out above 130, get long the strongest stocks at the top of the Live Update table and use trailing stops. If the SPY breaks below 125, focus on the short watch list and use SPY 126 as your stop out level. If you are not on the, you should be. Any light volume rally up to SPY 133 will present a shorting opportunity once the rally stalls. There are some great stocks on both sides of the market that you can be playing. Keep your size small. P.S - I hope some of you are long FSYS from the Daily Report. GO TEAM USA!!!!!!! image

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