Alert: Stock Markets Rally On These Key Factors
The market shot higher today right out of the gate. While many investors and analysts have been extremely bearish in the last few days, this Chief Market Strategist has been bullish, slowly accumulating long positions. The reasons why I was bullish for this week are simple. I will do my best to explain them.
First, the overly bearish sentiment after six straight down weeks was palpable. The markets always try and stay in equilibrium. Whenever the markets get too bearish or too bullish, the opposite price movement always occurs.
In addition, many people forgot it was options expiration. Institution sell a majority of the puts and calls to retail players. They receive a premium for that. If price goes against the institutions, it is in their interest to push the market in the opposite direction into options expiration to recoup those losses and turn a profit. In this case, the overly bearish sentiment in the markets had retail investors buying far more puts than calls. Prior to the rally today, those puts were in the favor of the retail investor handsomely, while the institution was going to be taking a loss. As we always know, generally, institutions never take losses. Today, those put options are worth a lot less and the institutions is looking to turn a profit into options expiration.
With the bearish sentiment reaching a crescendo, a plethora of economic news was set for release this week. The negative view of stocks had put a damper on economic expectations. In other words, the data this morning for retail sales could have been horrible, and still better than the market expected, thus creating a rally.
Lastly, the Dollar had soared into a key resistance point on the daily chart. This level happened to be the 50 and 20 moving average. With both moving averages together and price into them, it was almost impossible to not imagine a pull back in the Dollar. Sure enough, a weaker Dollar has helped the markets inch higher.
These are just some of the keys that have sent the markets soaring today. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $129.21, +1.51 (+1.18%), the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) is trading at $120.81, +1.35 (+1.13%) and the PowerShares QQQ Trust, Series 1 (NASDAQ:QQQ) is trading at $55.38, +0.74 (+1.35%).