In the last few years I have become more comfortable with day-trading the E-mini S&P 500 futures (ESZ13.CME) and using options when I get a longer-term feel. While I can't say I do it all the time, I can say after a big move I find it easier to hold options when there is going to be a directional shift. Yesterday the Dow closed up 205, the S&P closed up 23 and the NASDAQ up 45. The VIX that traded up to 18.61 on Tuesday traded down to 14.68 yesterday. As the VIX dropped, buyers poured into the S&P. Our desk saw large institutional buyers, as did others, in the E-mini S&P yesterday.
The Ned Davis stats have been right on and the S&P has acted accordingly. The S&P futures have been up five days in a row: Oct. 10 +36.2, Oct. 11 +14, Oct. 14 +5.3,Oct. 15 +12.3, Oct. 16 21.2. Overall, the E-mini S&P rallied from a low of 1640 to a high of around 1717 and now hovers around 1711. The Rock'em Sock'em Robots have absolutely killed the bears in the last five days. That said, the S&P can't keep going up like this, and with the next batch of good new the sellers will reappear. As much as I hate to say this, I lean to selling rallies. I may look to buy weakness, but the bus is now getting too full on the upside short-term. That doesn't mean the highs are in for the year, they aren't, but in the short term any big blast up probably won't hold initially. S&P 1775, here we come...
As always, use stops and keep an eye on the 10-handle rule. Don't forget to catch MrTopStep on The Closing Print video found under the OptionsTV page (top bar). We report directly from the SPX pits, wrapping up the day and positioning for trade tomorrow.
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