For now, it appears that the market does not want to resume and continue an uptrend. If this is the case, we need to look at the technical signals that tell us where the market can or should go in the short-term before resuming a potential longer term trend.
For me, the biggest signal has been the MACD – when I look at tech, this is the dominant signal for a slowing of the market movement. Let’s look at QQQ and see what I’m looking at:
When you look at the general activity of tech, it’s been choppy for a couple of weeks. But the MACD cross happened a few weeks ago, as well. Just looking at the MACD cross that occurred about 2 weeks ago, it told me that it was time to sit on my hands, as much as I wanted to buy into the market. The market looked like it wanted to continue higher, but the MACD told me to wait. So, it was time to buy lightly if I was bullish, or hold off if I was neutral, or potentially play bearish strategies if I was bearish.
And the reason behind this was that the last time that happened, it set up about a month of choppy downward price action before setting a new upward trend. In the process, we got a new high. Let’s remember that this is a choppy upward trend! I want to be careful to add new longs when the MACD says we have a bearish short-term, but I want to be long and bullish on the market overall.
The BEST way to do this for me is using options, but only if I can get leverage for that trade. So, let’s look at the VIX:
With implied volatility for the overall market near lows, getting involved in the market makes a lot of sense, but it makes even more sense if I can utilize a combination of timing and leverage. We’ve got a few days before I’m excited about timing, but the leverage is already there, so options are a great tool for jumping in when we start to see stocks from my Outlier Watch List giving that entry signal!
So please go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. As always, if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@optionhotline.com
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