Since hitting a low on Aug. 24, the S&P 500, Dow and Nasdaq have rallied a respective 6, 7 and 11 percent. But rather than take the positive price action as a sign to jump in, one trader who looks closely at the options market insists stocks will soon retest its August low.
"We've seen some nice moves in the last few days but I think these rallies should be sold," Andrew Keene said Monday on CNBC's "Trading Nation." The S&P 500 is up nearly 3 percent in the past week and is on track for its fifth consecutive day of gains, which would mark its longest winning streak since December 2014.
Looking at a chart of the SPY, the ETF that tracks the S&P 500, Keene noted that it has rallied to its 50-day moving average, which has proved to be a bearish indicator in the past few months. "Every time we have rallied to this moving average we have found sellers," said the founder of AlphaShark Trading. Additionally, Keene noted that with the 50-day moving average continuing to trade below the longer-term 200-day, the chart remains bearish, at least in the short term.