Both the S&P and NASDAQ indices are near record closing highs. The S&P has risen by 37 points, about 0.60%, reaching 6634. It even hit a new intraday high at 6636.08. The index shows a steady upward trend with minor corrections near Fibonacci levels. From April 30 to May 19, it rebounded after dropping to the 38.2% level. A similar pattern occurred from May 23 to June 11, where it corrected close to the 38.2% retracement and the 200-hour moving average before moving up again.

Recent Market Movement

The recent climb started on June 23 and peaked on July 15. The following dip did not drop to the 38.2% retracement at 6164.97, finding support instead around the July 7 low of 6201.51. This indicates strong buying interest at higher levels. Today’s new high highlights ongoing bullish momentum, even though the index is currently overbought. The trend stays strong as long as prices remain above key support levels: the 50-hour moving average at 6277.55 and the 100-hour moving average at 6252.80. If the price dips below these averages, it could signal a correction, but for now, the upward trend continues. It’s clear that resisting this upward trend may not be wise. With the CBOE Volatility Index (VIX) trading at its lowest since before the pandemic, around the 12-13 level, buying call options on the SPX or SPY is a cost-effective way to benefit from potential gains. The current low market fear makes these bullish bets relatively inexpensive.

Trading Strategy

For those looking to make money, selling out-of-the-money put credit spreads is still a good strategy. This method benefits from the overall upward movement, time decay, and steady volatility. Recent reports show US inflation cooled to 3.3% in May, leading the market to expect a higher chance of a Federal Reserve rate cut later this year, which supports equities. Historically, strong moves to new highs after consolidating typically have more room to grow than expected. We view the current market like the breakout in late 2020, which lasted months with only minor pullbacks. As a result, we maintain long positions in E-mini S&P 500 futures contracts and use a trailing stop to secure profits. We will follow the technical levels outlined by the analysis. A significant drop below the 100-hour moving average would indicate a change in short-term momentum, prompting us to reduce our exposure and take profits. Until then, it’s wise to stay long and let the market’s strength work for us. Create your live VT Markets account and start trading now.

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