by Steven Sarnoff
When temperatures start to fall, bears are known to move into a “get fat quick” phase. They gorge on anything edible to fatten up and survive their lengthy winter slumber.
When asked why the market was up or down on a particular day, my dad would reply in his Brooklynese, “Sometimes the bulls gotta get fed and sometimes the bears gotta get fed.” One of the lengthiest bull markets on record has left beleaguered bears hungry for a turn.
Are they ready to feast?
I think they are. Sensible speculators and investors use options to vie for fun, profit, and portfolio protection.
As you can see on my daily candlestick chart below, the S&P 500 has reached a point where something’s gotta give. I view each day’s trading as a struggle between bulls (buyers) and bears (sellers) for control of market direction. That struggle, between the positive influence of support (demand) from an up trend and the negative influence of resistance (supply) from a down trend, is reaching its apex. Markets often make their break, up or down, around the apex.
The recent strength in the US dollar, which deflated precious metals, may come to weigh on stocks. Seasonal influence may also come into play and offset central bankers’ monetary largesse. The lines of average price movement may be rolling to the downside and don’t be surprised to see the bears devour an S&P 500 drop back toward its 200-day moving average over the weeks ahead.
Click here to subscribe to Options Hotline today and see how we are positioning for the moves ahead.
Good luck in your trading.