Just when it looked like the markets were ready to break down, along came a rally. The rally was no surprise from oversold conditions. It appears the general market lean is now to the downside; the selling could get ugly.
As we approach the end of summer, the markets are trading on light volume. This week should be very slow as we move towards the Labor Day Holiday. The one hitch could be the jobs number on Friday.
Market reactions have been strange and out of character. Many moves have been unexplained. Recession has been ignored and the damage being done around the globe has only created a muted reaction. Something has got to give.
Although we have been watching flat VIX, the option markets seem to be telling a bearish story. Iron Condors led the way followed by Put Buyers, Bear Call Spreads, Bull Calls and Bear Calls.
The bulls were buying SPXW, NVDA NVDA , AMD AMD , QQQ QQQ , and XRT XRT , while the bears were selling SPY SPY , GLD GLD , IWM IWM , TSLA TSLA , and DIA DIA . The markets are acting as expected.
Remember, we can’t predict what’s next, but the price action will give indications and guide us in the right direction. All signs are starting to point lower however flexibility is the key to trading successfully.
As traders and investors, we have one thing to remember, follow the trend of the market. Be patient disciplined and leave your emotions out. The most important thing to remember is money management and self-control. — Todd Horwitz, Chief Strategist, BubbaTrading.com
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