Are the Markets Poised to Continue Making New Highs?

Tom Gentile

Posted in

By: Tom Gentile
March 20th, 2024

4 mins read

Originally published via our newsletter previously. Subscribe for early access!

Options Traders want to know. Are the markets going to continue to climb and make continuous new highs?

No one is going to come out and tell us yes or no. We need to do our technical analysis and see what fundamental investors and technical traders do with their capital and how that reflects in the charts for us to then be able to determine our belief of future market direction.

Cleanshot 2024 03 19 At 12.40.47@2x
Cleanshot 2024 03 19 At 12.40.47@2x

Yesterday the SPY was at an all-time high yet again.

Today you will read headlines that says the markets were down today, or the markets sold off from recent highs.  Don’t get too alarmed just yet as the S&P500 was down only -9.96-points today, which was only a little drop lower of -0.19%.                                                                       

Tuesday saw the markets have a winning session. The February U.S. inflation data came in about in line with expectations. Core inflation, which strips out food and energy from the headline reading, increased more than expected last month and this may set the tone of expectations being similar with the PPI due out tomorrow.

Market in Focus QQQ– Invesco QQQ Trust

Figure 1: 100-day Candle chart on QQQ
Figure 1: 100-day Candle chart on QQQ

The Q’s as this security is more referred to as, is an ETF or tracking security if you will as it tries to replicate the performance of stock in the NASDAQ 100.

I am highlighting this ETF again this week as many writeups online are stating what is going on with the markets and giving credit to NVDA for the reasons why the markets are higher and also when the markets are lower.

The correlation is as NVDA goes, higher lower, so go the markets.

If one wants to slap on the 10-day and 30-day Simple Moving Average (SMA) they will also see the Q’s at the 10-day. It has rode that higher since last November.

Tools and Observations

A Seasonal Pattern that I like to educate folks on is what I call the Mid-Month Pattern or the 9-11 Pattern.

Not the 9-1-1 pattern this is not an emergency situation, but rather it is a pattern where the markets trade higher over the 9, 10 and 11 ‘trading day’ of the month.

Not calendar dates, but trading days. We do not count weekend days or holiday’s where the markets are closed.

This month the 9th trading day falls on today, March 13. It runs over the next two trading days which ends Friday, March 15.

The premise one can anticipate the markets higher over this three-day period.

When it comes to the ‘markets’ we look at the major indices, specifically the SPY. This is the tracking ETF for the S&P 500.

The ETF opened at $517.11 today and we will see how it end up on the close of trade this Friday.

One can consider buying units in the SPY or consider an options trade. Since this is deemed a bullish pattern the base option trade one can consider is a Long Call. We usually look at the ‘At the Money’ or slightly ‘In the Money’ call option.

With the open price of $517.11 one could have looked at (and if you want to trade the SPY or an option on it for real that is up to you and your broker as we cannot and do not offer recommendations. We educate only – plain and simple) the March 15, 2024, $517 Calls. They were likely priced in the ball park of $2 on the open today.

Since this is a 3-day pattern we pretty much look at the options expiring the Friday following the start date (the 9th trading day) of the pattern.

One other thing of note.

SPY is also on the Money Calendar list for a start date of today, only it is showing a 29-day pattern.

An options trader can entertain a longer-term Long Call option trade on SPY based on that Money calendar Pattern if they want. The thing I like about this though, is it is on the seasonal Money Pattern list with a start date the same as the 9-11 or mod-month pattern.

It does not guarantee anything, but it is nice to have SPY has a start date for both setups. Option traders get to decide which time length pattern they wish to pursue.

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