Monday, February 22, 2016
Taking off to the upside to begin the week as the Dow climbed 228 points on lighter volume. The advance/declines were over 3 to 1 positive. The summation index continues higher. Short term overbought and staying there for the major stock averages. At this rate it doesn't appear as though we will get a chance for the SPY March calls. Resistance is at 1950 for the S&P 500 but I don't think that it will contain the rally. Sellers have disappeared. GE was up over 1/3 and the volume was average for lately. I am looking at the March calls here as well while we battle the 50 day moving average. Might be too late though. Gold was off over $20 on the futures as the US dollar rallied. The XAU was up about a point, while GDX added 1/8. Divergence with the metal here but the volume was pretty light. A pause is due here to be sure. Mentally I'm feeling OK. We've rolled into the March option cycle and all signs point to higher equity prices. A pullback may not occur. What I'm hearing in the media is that the rally may not be for real. That is a sure sign that it is. Most agree with my scenario of some type of move higher and then we move back down lower. But once again, if everyone agrees on some thing in this game, it isn't going to happen. What I'm not hearing is that we run higher from here to new all time highs. Some of the longer term technical indicators had pretty decent oversold levels from the recent lows. These readings usually led to a more extended gain for the major stock averages. It is something to consider. The option premiums are high at the moment and I would at least like to see a short term oversold condition before attempting the March calls. May not happen. However I do not want to chase anything here. So patience is the name of the game for now. Europe and Asia have rallied along with the US in the past couple of weeks. We'll keep an eye on things overnight and see if the rally continues tomorrow.