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Friday, September 3, 2010

SPY Daily Chart


-SPY closed the week right at the resistance level of wider, falling channel lines. The most recent low is above the previous low, so if SPY closes above 110.9 level next week, we could see a move upto 116 level. However, because we shot up around 5% in just 3 days and because 113.2 level has been the top of the previous two highs, I would expect SPY to consolidate sideways next week before building up more energy to breakout to the upside.
- The reason I am more bullish then bearish on the market is because AG and commodity stocks are showing higher highs and lower lows. These were the stocks that fell way before the overall market did back in April, and it seems as though the strength in these stocks are leading the market upwards as well.
- Most of my technical indicators are bullish and EFV is at 20.55, while implied volatility in SPY at-the-money options is 20. Of course, SPY could fall and implied volatility on options rise, I believe there is higher probability of SPY going higher. I would look to put 1/2 long delta position on Monday and the other half on weakness. Finally, I am tempted to go neutral SPY vol since it has fallen from 27 to 20 this week, but EFV indicator is showing that's it is in a downward trend, so I would not go long vol.

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