SPY

The S&P finally broke out above an important technical level and closed above it's 200 day MA. SPY closed at 142.55. While this sounds bullish - remember tomorrow is expiration day and most of the market has become wildly overbought. SPY has a 2 day RSI of almost 97 and so does much of my watchlist. Some key levels, going forward, for the SPY at least, are 144/145 to the upside and 138 to the downside. I recommend getting out at either of these levels should we get there. Further, if we do get as high as 144/145 I recommend selling some OTM credit spreads or ratio spreads on SPY (or similar behaving ETFs) as I think some pullback is imminent. I don't recommend buying Puts, since overbought doesn't mean the stock's going down, it usually represents exhaustion and/or overextension which equates to either a pullback or simply sideways movement until overbought conditions are worked off. This is why a ratio spread can be a good idea. If done right (usually means you have to go a few months out) you will profit on a move up, down, or sideways and only lose from a huge move up. They are similar to selling OTM credit spreads except you have a greater range to make a profit but it does carry more risk should the stock continue past your long leg.

Here is a short list of stocks with their 2 day RSI above 99: MDY, DRYS, IJH, VMC, NAVS, VRSN, DOV, CRS. I believe statistically it's more profitable to go long on oversold stocks (i.e. 2 day RSI less than 05) than it is to go short on those with 2 day RSI above 95. Overbought stocks seems to have more staying power. Either way, some of these, you will find, are otherwise nice looking charts and they should stay on your watchlist - there is a reason why some of these are overbought...

FXI | MON | POT | SPY

What a difference a day can make. It's already time to revisit some recently mentioned setups.



FXI: Overbought. Overall, nice looking chart for the longer-term.















MON: Oversold. Monsanto is among a list of stocks that got hammered after reporting good numbers and raising their outlook. All else equal, it is simply presenting an opportunity.













POT: Another example of a stock that just got hammered after reporting good numbers and raising their outlook. The difference here is the enormous amount of volume that traded today - proceed with caution.












SPY: I thought the bulls were going to do it today but the 139/140 resistance continues to hold. I think it will break sooner than later, especially if XLF can string together another couple days like it did today....