Nice rally on the S&P 500 today as we smashed through the potential double top and are heading straight for 1,687.18 as the next target. Twiggs Money flow has also managed to stay positive above the 0.00 level creating some healthy inbound money flow.
The question however is will the Fed ‘money party’ reflect in a similar way on the balance sheets of the underpinning companies ,represented by the indexes, as earnings season begins.
An interesting pattern to note however is that as the index continues on with enjoying its new found highs the CBOE Volatity index (VIX) is working its way back to an interesting trend line. A wise man once said to ‘be fearful when people are greedy’. As we fall towards this trend line are we in safe waters? or perhaps as we approaching a dangerous complacency trend line.
Either way our approach will be to hunt for the nasty surprises to the down side. The strategy for next week will be to hunt for weak companies that have rallied into resistance and look for extremely cheap put options that expire on Friday and play a speculative punt that will likely either expire worthless….or!…if the company drops…. could make some potentially lucrative returns.