The Market has made back a lot of ground from the late summer 10% correction – it will be interesting to see the reaction today, after the Fed announces its decision on short term interest rates – might be a game changer. If the market rallies, I will probably sit tight, or even sell more risk assets if the Cape Ration tops 27.5. If the market start’s the inevitable reversion to the mean – some opportunities might finally present themselves.
Remember, in the short term – anything can happen. For example, the Dow Transports have been rallying all week – even though FedEx missed on earnings and cut its full-year earnings forecast – how does that make sense?
The following chart is based on the Z Option Market Analysis Tool – which determines if a market is trending by assigning a trending score from -3 to +3. This helps us keep our trading with the trend.
| Symbol | Description | Short Term Trend | Medium Term Trend |
| $DJI | Dow Jones Industrial Average | 2 | -1 |
| SPX | S&P 500 INDEX | 2 | -1 |
| RUT | RUSSELL 2000 INDEX | 2 | -1 |
| /ZB[Z5] | 30-Year U.S. Treasury Bond Futures,ETH | 2 | 2 |
| /ZN[Z5] | 10-Year U.S. Treasury Note Futures,ETH | 2 | 3 |
| VIX | CBOE MARKET VOLATILITY INDEX | -3 | 1 |
| /GC[Z5] | Gold Futures, ETH | -1 | -3 |
| /CL[V5] | Light Sweet Crude Oil Futures,ETH | 3 | 2 |
| /DX[Z5] | US Dollar Index Futures | -3 | -3 |
| NDX | NASDAQ-100 INDEX INDEX | 3 | -1 |
| $DJT | Dow Jones Transportation Average | 3 | 2 |
| XLK | SELECT SECTOR SPDR TRUST TECHNOLOGY SELECT INDEX | 3 | -1 |
| XLI | SELECT SECTOR SPDR TRUST INDUSTRIAL SELECT INDEX | 2 | -1 |
| XLY | SELECT SECTOR SPDR TRUST CONSUMER DIS SELECT INDEX | 3 | 2 |
| XLB | SELECT SECTOR SPDR TRUST MATERIALS SELECT SEC INDEX | -1 | -3 |
| XLE | SELECT SECTOR SPDR TRUST ENERGY SELECT INDEX | 2 | -1 |
| XLP | SELECT SECTOR SPDR TRUST CONSUMER STAPLES INDEX | 2 | -1 |
| XLV | SELECT SECTOR SPDR TRUST HEALTH CARE SELECT INDEX | 2 | -1 |
| XLU | SELECT SECTOR SPDR TRUST UTILITIES SELECT INDEX | 2 | -1 |
| XLF | SELECT SECTOR SPDR TRUST FINANCIAL SELECT SECTOR FUND | 2 | -1 |
Any market showing a 3 or a -3 is trending strongly – and should be factored into any options strategy you are contemplating.
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