Investor Alert
Lawrence G. McMillan

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April 2, 2020, 11:05 a.m. EDT

Stay bearish on the S&P 500, and play the spread on these deals

Stock market remains volatile and oversold within the confines of an ongoing bear market

By Lawrence G. McMillan, MarketWatch

AFP via Getty Images

The stock market staged a pretty strong oversold rally from March 23 through March 31. In the first three days of that rally, the advance was over 20%, and it was the strongest 3-day rally since… 1931. 1931 was one of the worst years of the 1929-1933 bear market, so these oversold rallies occur within bear markets and are not unusual. In fact, in the 1929-1933 bear market, there were seven rallies of more than 20%

Oversold rallies typically reach the declining 20-day moving average, overshoot it some, and then fail. The current rally just barely touched the declining 20-day MA before failing. I would have thought it had a little more room to the upside — to 2730 in the S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.40% , say — but it did not. Now, there is resistance at 2650, where that rally topped out.

+58.34 +1.40%
Volume: 2.04B
June 21, 2021 5:12p

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