Dan Passarelli, CEO - Market Taker Mentoring

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The market just blew the doors off it today. The S&P 500 was up one and a half percent. Every major sector in the market was up quite a bit. Utilities is only up about  0.4%.

Everything else is up close to 1% or more or a lot more. And the most important thing is that the 50 day moving average for the S&P 500 was permeated today. We talked a little bit about this in the last video, the 50 day moving average is one of those key moving averages where when the stocks are below it, it's resistance and when stocks are above it, it supports and once it's crossed it becomes the other. And so today what happened is the SPY was below the 50 day moving average so it was resistance and today across above it. So what's likely to happen is we can get some follow through to the upside.

Now the 20 day moving average is sitting pretty close to where we close. 20 day moving average very commonly sees follow through. And so if on Monday we break through that it's pretty likely that we're going to see follow through to the upside. Dan mentioned in the last video, we do have CPI and PPI coming out next week and that's going to be some real fundamental information that's going to override anything we could be looking at technically. 

In eleven days we have the September Fed meeting. Now we had a few Fed governors speaking today and they said some things that were positives for the economy and some things that were negative. Some of them are leading us to believe that they would be raising interest rates another 75 basis points at that next meeting. That's pretty widely believed at this point. We won't be surprised if we see a couple more good updates. But then when the inflation information comes out next week, market could go up or down. But it's really all about that next Fed meeting. And as interest rates go up, we could be looking at a 'buy the rumor sell the news' sort of scenario.

"If a lot of the market is expecting a 75 basis point hike and the market continues higher  we would be pulling back pretty well. Now just one more thing. What I'm looking towards doing myself (if the market does end up heading a bit higher) is looking for some opportunities to buy some puts as a hedge against longer term investments. Now if you look at the FIX, it's still 22.85 here after Friday's close, which is still a fairly high level, and it's likely to be staying high until after PPI and CPI, and especially until and after the Fed announcement next week. But if I can buy put in a higher market with a lower implied volatility, I think that's going to do."

Hope that helps.