The majority of the financial headlines in stocks have been largely positive for most of this year. There is good reason for this, as many of the central benchmarks continue to trade near record levels. But what has been largely missed in the financial media is the fact that bullish momentum in equities has reversed sharply and this has led to diminished gains over the last six months. It also means that markets are now caught in extremely tight trading ranges that have made it difficult for those employing traditional stock strategies to make substantive gains.
Does this mean that investors will have no way to capitalize on the moves that are currently present in the stock market? Not at all. For traders and investors who are willing to consider alternative strategies that can benefit from low market volatility, there are many possibilities that can be used to generate gains. Recent market industry reports show that these trends are growing and that price ranges in the S&P 500 have contracted to their lowest levels in 20 years. So investors will need to identify alternative strategies in order to generate gains from trades in assets related to the S&P 500.
Specifically, this means dealing with options rather than with a traditional "buy and hold" position. Newer options traders might want to consider a "no-touch" strategy, which is something that tends to benefit from slowing price trends. More advanced options traders might want to consider put/call debit spreads, ratio spreads or put/call calendars. These are all strategies that benefit from reduced price movements rather than strong upward trends. Here, we will look at some of the critical support and resistance levels in the SPDR S&P 500 Trust ETF (NYSE: SPY), which can be used to define entries in some of these positions.
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SPDR S&P 500 Trust ETF (NYSE: SPY)
Critical Resistance: 216
Critical Support: 205
Trading Bias: Sideways
Chart Source: FiboGroup
S&P 500 / SPY - Stock Trading Strategy: SIdeways conditions persist in the SPY ETF and this points to no-touch options defined by support and resistance at 205 and 216. Neutral MACD readings support the outlook.
SPY is giving traders little reason to be excited despite the fact that we are trading near record levels in the S&P 500 itself. Because of this, newer options traders should consider entering into no-touch options that are defined by support at 205 and resistance at 216 as a basis for new trades. Indicator readings on the long-term charts suggests that these conditions will continue for some time, so it is still best to avoid outright short or long positions that are likely to stall and produce little in terms of real gains.
