The financial markets managed to break through the major resistance zones. For instance, there was a break of the 3,200 on the S&P chart.
This breakout is quite an impressive achievement when considering the fact that financial markets were down 35% just 2 months ago. The market is now down only 0.7% from this year’s High.
This article explains more about the remarkable market recovery in June 2020.
Not only the S&P rally was visible. The Nasdaq hit for the first time the 10.000 level. Stocks like APPLE and AMAZON performed very well. Here the closing prices: SPX closed at 3,207, NDX 9,967, AAPL 343.99, AMAZON 2600.86.
The main reasons the financial markets jumped higher is that the Fed is pumping money into the system faster than before. The Coronavirus is proving to be benign compared to fears (perhaps 0.2% mortality and not 4%).
The $5 trillion that is going in money market funds has nowhere to go than into the financial markets, it seems. With the coronavirus losing headlines to protests, people will think about the markets more. Considering the fast rebound and breakout, the markets seem to have a lot more space to go up – as well. This is a buy signal for happy Technicians.
We will keep running, but we have a day in the future where President Trump and President Xi will start testing each other, and the unseen and ongoing cold war will become visible. People will be running from stocks again.
How can we use this market analysis to take advantage using Options?.
In the previous articles we took a long position on SPY which is the SPX ETF. SPY is traded at 1/10 of the SPX value, so 3,000 SPX value is 300 SPY. Options on this ETF are more cheap than Options on SPX.
We are still bullish. It might be a good idea to roll the position to take some profit from the table.
Rolling means closing the existing position and using the profit to purchase a new long position with less risk.
To take advantage of a bullish move for the next month we can buy a CALL spread on SPY 60/70 days expiration.
Keep in mind, that there are still factors such as Trump and China that traders need to keep an eye on.
Thinking about options but not sure yet? There are a couple of ways to move forward before committing to the course or educational signal service. Here is how you can stay in touch:
If you are ready to move forward, then you can choose from:
Marco Doni – ecs.OPTIONS expert and CNBC contributor
The articles are not intended to give any advice on how to invest money, they are just for educational purposes.