Markets tried to move higher on Monday but the S&P 500 failed to breach its 200 Day Moving Average after early morning gains gave way due mostly to Moody’s downgrade of Greece’s debt to junk status.  

We closed our SPDR S&P 500 ETF (NYSE:SPY) December 110 Call Option Monday morning at the open for a +10.8% gain in two trading days which was good news and maintain our “long” ETF positions.  

In spite of Monday’s decline, from a technical standpoint, many market internals moved higher, indicating unseen strength below the surface represented by the major indexes.  

On a short term basis (a day or two) markets remain overbought from recent gains and are subject to more downside.  However, once that is complete, I expect another test of the 200 Day Moving Average.  Three have failed.  Internals would suggest that the 4th could be a success, particularly with all of the negative news and pessimism swirling around this week..  

As we discussed on the weekend, lots of important news this week on the economic front and with earnings from bellwether, Federal Express (NYSE:FDX).  

And “beware the witch.”    Friday, June 18th, is June Quadruple Witching Day when stock options, index options, index futures and single stock futures expire which typically brings increased volatility to the markets.   A historical lookback shows that 50% of the weeks with June Witching Days were positive and 50% ended in the red, so statistically speaking, this week could go either way. 

Written By John Nyaradi Publisher of Wall Street Sector Selector

John Nyaradi is Publisher of Wall Street Sector Selector and Senior Vice President of Private Client Services for ProfitScore Capital Management, Inc. 

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