"The FOMC inspired rally has continued and a new trading range may be setting up," says Larry McMillan in his Daily Strategist, an options trading service.
The technician explains, "With continued strength, the breakout of the trading range is starting to have a more valid feel to it – and a new trading range bordered by 1480/1490 on the downside to 1550 on the upside may now be setting up."
Market breadth, he notes, is overbought and he considers this bullish – especially given the fact that we have just seen a 90% up volume day. He suggests, "As we have often seen – a market that is overbought and that adds to the overbought condition (on price improvement) – has positive price momentum in its favor."
He also points out that the $VIX has continued to trend lower, which he considers positive. Further, he adds, the Equity-Only put-call ratios remain bullish as well. Therefore, he states, "Our technical indicators are overwhelmingly bullish; and sector performance is extremely positive based on the Financial and Energy sectors."
Meanwhile, traders should focus on the OEX index to determine whether or not buy programs will be triggered during tomorrow's operations expiration. He explains, "The rally has had the effect of tilting the scale heavily towards the 'buy' side for expiration. There are virtually no expiring in-the-money puts, and so whatever in-the-money calls there are, add buying fuel to this expiration."
Specifically, he says, "If OEX is above 700, there should be a bullish bias to expiration. And if OEX is above 710 at expiration (it's 714 right now), the buying should be substantial."
In his trading portfolio, the technician is going a long call position in the S&P 500 index SPDRS, recommending the SPY Oct 149 calls. He forecasts, "It is possible there will a pullback towards support at 1490-1505, but a complete pullback may not be forthcoming because there still appears to be a large short interest and so declines will likely be muted for a while."
Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.
Top growth fund manager sours on Apple, U.S. tech
New Facebook share structure hints at IPO
Before the bell: Futures higher ahead of housing, jobless data
