Here are my thoughts about where the market may be heading over the short-to-intermediate term, and how it may get there…
After selling off most of last week, the S&P has rallied about +4% off the July 14th lows. The rally was propelled mainly by tech stocks like AAPL and QCOM , as well as financials like MS and BAC . Despite this impressive move, the market has been stuck in a rather precarious 250 point range for about a month.
Another interesting sector has been the XLE (energy). It has seen spectacular moves in both directions, and is currently down about -30% off its June highs. However, XLE looks like its showing signs of a dead cat bounce. If this occurs, it would carry the S&P with it.
Heading into next week, I’ll be watching XLE closely – and possibly shopping for some swing trades to the long side. As of now, I think the pathways have a slightly greater probability of being realized over the next 1-3 weeks (referring to the break of the range), but I am lightly allocated, and very much in a “wait and watch” mode. If the market breaks the range to the downside (below 375), and SKEW have nowhere it could but up, so get very ugly, very quickly.
Note that the pathways aren’t predictions. They are just general, hypothetical guidelines. The price points are more important to the overall narrative. Good luck; lets see how it goes!