The next near-term support area for SPDR S&P 500 ETF Trust (SPY)—a good area for writing covered SPY calls one-month out--should lie around 267, near the March 1 close (the lowest close in the past five weeks) and the lower Bollinger band, says Marvin Appel, MD, PhD.

State of the market—The S&P 500 Index continues to consolidate 4%-6% above the Feb. 8 closing lows and remains volatile.

The latest scare was a 1.4% decline on March 19, ostensibly in response to scrutiny now directed at Facebook for allowing a political consultant, Cambridge Analytics, inappropriate access to its users’ data. Facebook (FB) lost 6.8% on March 19 and was down 2.5% on March 20.

However, I think there is more going on than just Facebook. News from Europe is good, with Great Britain having reached an agreement with the EU to extend British and EU businesses’ access to each other’s markets for two years after Brexit becomes official. 

The pound jumped 0.6% on March 19, but European stock markets suffered declines similar to those experienced here.

I believe we are seeing a fundamental change in market psychology since the end of January, from euphoric to skeptical.  In this new environment, stocks will have trouble notching big gains. 

On the other hand, stocks should be able to continue to hold their ground for some months; Our intermediate-term models remain overall positive and market pullbacks have not seen significant follow-through.

Other technical signals are less bullish, including a potential MACD sell signal that could occur within the next week.

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Covered call writing was a tough game in 2017 with option implied volatilities at record lows.

But now that CBOE Volatility Index (VIX) is back to more normal readings (19.5% is the long-term average), those looking to bottom fish at oversold areas should write SPY calls. 

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