Some traders that lean heavily on charting mistakenly believe that by following every little shake ‘n’ bake of the intraday action they will attain a clearer view of future market direction.  Sadly, this approach often has the opposite effect of increasing a trader’s feeling of uncertainty. The trick lies in tuning out the noise while being open to signals significant enough to change your outlook. 

A brief survey of the recent price action of the S&P 500 Index reveals two important developments that could change our short-term outlook. First, a lower pivot high formed at 1360 which sets more of a neutral to mildly bearish tone in the market. And second, we broke a prior support level at 1330 which further damages the bullish structure of the trend. As a result of both signals it may not be a bad idea to consider neutral to bearish trade ideas. For example, traders could use the current bounce as an opportunity for options trading investors to sell bear call spreads in S&P 500 Index Options (NYSE: SPY).

Find more option analysis and trading ideas at  Options Trading Strategies.

One potential choice would be selling the SPY June 137-140 Call Spread. Traders would sell to open the SPY June 137 Call while buying to open the SPY June 140 Call. In essence the trader believes SPY will not rise to $137 by June expiration. The position profits from time decay as well as a decline in the price of the SPY.  In timing the entry I suggest waiting until the current bounce exhausts itself.

Source:  MachTrader

At the time of this writing Tyler Craig owned bear call spreads on the SPY.

Follow Tyler Craig on Twitter@TylersTrading.