Strategies for the Current S&P Levels
Yesterday’s market action brought a jump into the close, leaving the S&P 500 and Nasdaq nearly flat for the day. This near net-zero movement highlights the importance of the current levels on the SPY, which continues to serve as a critical pivot point.
Here’s how I’m approaching this situation and my strategy for what comes next.
Key Focus: The Weekly Close
The SPY’s current level is an important indicator I’m monitoring to determine market direction. The outcome of tomorrow’s weekly close will provide clarity:
- A Strong Close Below $580: If we see a decisive drop, I’ll pivot to short positions to capture a deeper market correction.
- A Big Move Up Above $595: Should the market bounce significantly, I’ll focus on directional trades targeting the all-time highs.
My expectation?
We will probably end up somewhere in between, in “no man’s land.” While this scenario might seem less clear-cut, it doesn’t mean all trading is off the table.
For example, you can still look at the Profit Pairs Strategy which targets opportunities in either direction with no bias at all.
And our Overnight Options are meant to hit targets even on small volatile back and forth days even if the market finishes in one direction or the other.
Current Trade Ideas: Two Profit Pairs
While awaiting confirmation from the weekly close, here are two pairs I like right now…
- Long AVGO / Short AMD: Leveraging relative strength in Broadcom (AVGO) against potential weakness in Advanced Micro Devices (AMD).
- Long OKE / Short XOM: Capitalizing on the divergence between Oneok Inc. (OKE) and Exxon Mobil (XOM).
For these pairs, I typically use options with 5-7 weeks to expiration. I aim for strikes that are 1-3% out of the money, adjusting based on each stock’s volatility. This setup provides a balance between risk and reward while allowing for flexibility amid the current market’s two-way volatility.
Keep in mind, volatility remains a dominant theme, and I anticipate swings in both directions.
Stay Updated
As the situation evolves, I’ll continue to share updates and insights. Whether we see a breakout, a breakdown, or land in neutral territory, there’s always an opportunity to trade with a clear, informed plan.
Recognizing that sometimes the plan is not directional is a key part of developing your trading!
Have a great weekend,
Nate
