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My indicators are back to giving neutral readings, a mild upgrade from last week’s bearish signals, but they have not managed to show any real signs of bullishness for more than a brief period of time over the last few weeks.
Additionally, it looks like the S&P 500 is set to test its all-time high of 2,872.87 over the next week or two, and that’s likely going to act as a strong level of resistance. I think the odds are that the initial test of that level is going to fail, leading to a short- to intermediate-term correction in the market.
Investor complacency is also showing up in the latest Investors Intelligence survey, which indicated that there are more than twice as many bulls than bears right now. So, with the S&P nearing its prior peak and the S&P 500 Volatility Index (INDEXCBOE:VIX) heading towards the single digits, the technical picture is shaping up to look quite like what we saw just before the sharp correction at the start of this year.
Today I’m recommending a bearish trade on a stock that’s looking particularly vulnerable after missing its Q3 numbers: Beacon Roofing Supply, Inc. (NASDAQ:BECN).
Buy to open the BECN Oct 35 Puts (BECN181019P00035000) at $0.80 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
