MARKET DIRECTION CALL S&P 500

The market remains overbought and if you recall from my July 1 market direction call I indicated the market can remain overbought longer than many investors think. Today's action is expected after such a run up. I would expect more weakness ahead. Volume was very poor and the ultimate oscillator is still flashing overbought. A pull back could take the S&P down to perhaps 1310. I'm not great at picking points of pullbacks, but I doubt any pullback will get much below 1300 which is just below the 50 day moving average. I look at it as an opportunity to sell more puts.

Part of the problem today was the XLF turning down along with the downgrade of Portugal sovereign debt and rumblings about European Bank debt being downgraded. The European crisis is far from over and be prepared that anytime anything of anxiety out of Europe arises, the market will probably stall. However I believe any pullback is just another opportunity for my naked puts.

SUMMARY

II am putting more capital back to work and buying back my sold puts as they earn profit and then selling more. Today for example I bought and closed my July Nucor $38 puts and sold into August at the $37 strike. This works right into my Cautious Bull Strategy which I discussed back in January.