Stocks are rallying intra-day, bouncing off the support levels we highlighted in our most recent post. The 20-day has acted as very key support throughout the rally and a move upward today on the Dow and S&P 500 was crucial for a continuation given the more extended correction in the NASDAQ.

While opportunities are available particularly for day traders, more patient traders may wish to evaluate market strength at key resistance levels overhead. We’re taking a cautious-cautious approach to the market, and are leaning towards bear calls. Why? Because even if the market moves higher, the bear calls profit once underlying stocks are below the short call strike prices. And bear calls essentially are statements against aggressive rises in the markets. After a market has risen substantially, and a very substantial further rise is unexpected, a bear call can profit in a slight uptrend (provided the bear call is out-of-the-money), a flat trend or indeed a bearish trend!

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