S&P 500 Touched $5,500 Today

Tom Gentile

Posted in

By: Tom Gentile
June 27th, 2024

4 mins read

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

I didn’t say closed at or above $5,500 today.

I said it touched $5,500 today. Had it held at or closed above $5,500 that would have been an even more bullish move than it actually performed on the day.

Image 39

Today’s price action reminded me of a person doing a vertical jump, like NFL prospects do at the combine when auditioning for NFL teams.

Where a person jumps as high as they can they inevitably come back to the ground or where they started from.

Now the S&P 500 did touch $5,500 and it did come back to where it started from if not a little lower.  It fell back below its days starting point, closing down  a 1/4 of a percent at  $5,473.17.

NVDA will be given the attention and blame for a soft day as it slide back -4.80 (-3.54%) to close at a spilt adjusted $130.78.

Markets in Focus: SPY – SPDR S&P 500 ETF Trust

Image 40

I thought I would go back to my overall market analysis with the SPY.

Yes, NVDA did slide back today, along with some other Magnificent 7 stocks like AMZN, AAPL and MSFT.

Even though it wasn’t a dramatic day of seling off, the last two trading days have created a Japanes Candle Reversal pattern called a Bearih Engulfing pattern.

This is where the current period (I am using day candles) opend and closed in a manner that engulfs or captures the prior period inside it candle body (one can assess high and closes of the periods too if they choose).

This indicates a potential reversal in price action and though a pullback could happen to say the 10-day SMA or fill the gap lower, it might be a slight pullback as the trend is still strong and pullbacks in uptrends are welcomed.

Tools and Observations

Stock Split Education

I wrote an educational piece on another website of mine www.tomstradingroom.com about the NVDA 10:1 Stock Split.

In I stated where other financial professionals will feel compelled to teach or remind clients of theirs that they don’t automatically 10x their money when the tock splits.

The stock price adjust s commensurate with the stock split ratio.  In this case NVDA did a 10-1 split so the price of the stock adjust to 1/10th its pre split price.  As an example only of the stock was at $1,200 the morning after it opens at $120 (granted no pre-market machinations happen.

The reason I like splits is the company that does a split tends to regain its pre-split price over time.  From an investment point of view that is great.

But as I noted then and will now who are new to me and my education, I focus a lot on options trading.

What I want to highlight here is another valubale piece of knowledge for those of you new to the world of stock splits.

When the stock splits, the potion splits.

So let me use the tools here to show an example of why I like trading options on stock split companies.

NVDA was set to split June 6.  On June 6 the stock was trading around $1,210 near its close.

Take a look at the July 19, 2024, $1200 Call options

At the close of markets my tools had those options priced at $81.35 or $8,135 for one contract.

Image 41

Post split the option adjustments made are as follows.

The number of contracts became 10 contracts.

The 1200 strike price became the 121 strike price.

The pricing was showing now $8.14

Image 42

The cost or risk is roughly still the same the trading day after the split. Where it was 1 conract at $81.35 or a cost/risk of $8,135 for the option, one now has 10 contracts at 8.14 so you can see the cost is $8,140, (10 contracts is like controlling 1,00 shares for 8.14 each).

But again, I wasn’t anticipating making 10x my money the next morning.

My anticipation is the stock will move higher after the split eventually.

Notice the pricing, strike price and number of contracts is adjusted.  Again, anticipate when a stock moves higher so should the call option.

Look at what happened.

Image 43

This data is for the close of market June 18, 2024.

The bid/ ask was 016.80 x 17.20.  the split adjusted cost per contract was $8.14 and the closing data shows it could have been closed at double that amount.

That is a 100% ROI on a stock spliut company that happened in 12 trading days.

We didn’t have to wait for the stock to double if we were doing just a stock trade.  Using the power and leverage of options AND the typical positive situation that happens with stock split companies this was a potential double in the making in WAY less time.

Tom Gentile
C1P: Chief 1-Percenter

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