SPX: Bulls Remain in Control
In the chart you'll see 2 black curves. It may look like a Cup and Handle formation. However, it can't be identified that way because the Cup section (first black curve) requires a smooth rounded bottom. For the first black curve, the pattern was more like a double 'V' bottom that had a mini bull run on the break out from 3006 to 3019. Recently, we had a Handle section (second black curve). That part is more rounded than the Cup section, but still not the best formation. The best way to identify this entire formation is probably a Triple Drive. There is a rising black trend line that connects the higher highs.
The rising lower trend line (purple) cuts the first black curve and forms a line segment, call it AB. We obtain midpoint AB, call it point M. A line segment is formed that connects point M to the rising black trend line (green line segment with arrow pointing up). This is the anticipated measured move for the week starting 07/29/2019. If this line segment is translated to the location where we closed today (at about 3026) on the chart, this gives a target of about 3053. This could be reached before the FOMC meeting on 07/31/2019 @ 2PM. That area in the chart may contain heavy resistance, but for now there is no question at this point that bulls are still in control. Don't fight the tape.
Bullish Strategy: Sell a put spread expiring 07/31/2019. Depending on where the market opens on 07/29/2019, you could sell the 3050P and buy the 3025P (or nearest strike below where the market opens). Close the position if price action is near or hits the rising upper trend line (purple). If the position has a paper profit before 2PM on 07/31/2019, get out. You don't want to be subject to event/news risk. If the position is already losing, it will already have a defined/fixed risk level due to the nature of the put spread option strategy. Alternatively, you could just go long futures or call option if that's your preference/style.
Bearish Strategy: Wait to see if the market wants to move to the 3050s area. If so, there may be heavy resistance and may present a short opportunity. In that case, the market may decide to move from the rising upper trend line (purple) to the rising lower trend line (purple). That could be about a 40-point drop.
The rising lower trend line (purple) cuts the first black curve and forms a line segment, call it AB. We obtain midpoint AB, call it point M. A line segment is formed that connects point M to the rising black trend line (green line segment with arrow pointing up). This is the anticipated measured move for the week starting 07/29/2019. If this line segment is translated to the location where we closed today (at about 3026) on the chart, this gives a target of about 3053. This could be reached before the FOMC meeting on 07/31/2019 @ 2PM. That area in the chart may contain heavy resistance, but for now there is no question at this point that bulls are still in control. Don't fight the tape.
Bullish Strategy: Sell a put spread expiring 07/31/2019. Depending on where the market opens on 07/29/2019, you could sell the 3050P and buy the 3025P (or nearest strike below where the market opens). Close the position if price action is near or hits the rising upper trend line (purple). If the position has a paper profit before 2PM on 07/31/2019, get out. You don't want to be subject to event/news risk. If the position is already losing, it will already have a defined/fixed risk level due to the nature of the put spread option strategy. Alternatively, you could just go long futures or call option if that's your preference/style.
Bearish Strategy: Wait to see if the market wants to move to the 3050s area. If so, there may be heavy resistance and may present a short opportunity. In that case, the market may decide to move from the rising upper trend line (purple) to the rising lower trend line (purple). That could be about a 40-point drop.
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