In my previous post I had mentioned the importance of July 5th high in S&P and Dow Jones. To reiterate, on July 5th S&P made high of 1374 whereas Dow Jones made high of 12,961. I had mentioned that both indices must cross the highs of July 5th simultaneously. On July 19th S&P cross 1374 and closed at 1376 whereas Dow Jones failed to close above 12,961. It closed at 12,943. This was the first warning sign that market is getting exhausted. Next day on Friday July 20th Dow Jones dropped 121 points and S&P 14 points. On Thursday, after spotting the heat around the corner I immediately sent out alert to members of Swing Options Trading Service to close all long positions with profit except one and we immediately switched to short position in CHK. Next day we closed CHK Puts for 81% gains and also bought and sold PNC Puts for 17 percent gains. In other words knowing in advance what the market can do pays off well.
Now S&P could come down to test the support which is at 1355. This can happen by Tuesday – July 24th close. On Tuesday after market close AAPL is reporting for earning. This could be a major market mover event. In case market decides to move up due to AAPL earnings then S&P must again cross and close above 1375 which it has failed before and Dow Jones must cross July 19th high of 12,978. This can happen by Friday – July 27th. If both of these indices cross and close then we can expect that market will move up further and S&P would go for 1390-1405 target and Dow Jones 13,100.
However, if S&P breaks 1355 support then it will come down to another support level of 1340-1345 (mentioned previously in other posts). This support level is also being talked about in the media heavily. The break of 1340 will bring S&P down to 1310 and 1310 must hold.
On July 10th CHK fell from $20.25 to $18.60 level. Next six sessions it tried to consolidate and move upward as shown by small candles enclosed in the circle. However, on July 19th CHK started moving down with good volume. Trade alert to Swing Options Trading members were sent to buy Aug 18 Puts for 94 cents. On July 20th, CHK accelerated downward towards its 50-day moving average. When CHK hit 50-day moving average members were sent an alert to lock gains of 81%.
Chart shown below: