For the second week in a row, markets continued to be very volatile and investors were whipsawed on Tuesday when Trump announced he's going to delay the additional 10% tariffs on the remaining part of Chinese goods. However, just two days after his action, Chinese officials said countermeasures will be taken if the US escalates the trade dispute citing the Asian country will do whatever it takes to win this war. Adding recession fears due to the inverse yield curve, there was a clear flight to safe havens such as gold and bonds whereas investors pulled their money back out of equities. Is it time to buy the dip?

First of all, the Nasdaq once again proved to be recovering from its steepest losses seen since May. What's interesting, though, is that the technology index seems to be in a much better shape than the overall market, indicating traditional sectors such as materials continue to lag behind the S&P-500. For the bulls, there are some hopeful signs:

• The Nasdaq managed to set a higher bottom

• The MACD line seems to be stabilizing while the blue bars show some weakness in the down move

• Earnings growth has been revised upwards (see details below)

• If and only when the Nasdaq closes above $188 backed by a solid white candle (robust body with no big shadows), the downtrend can be neutralized

As can be seen in the below chart, 12-month forward earnings are expected to increase 8.2% on a YoY basis versus the trailing 12-month actual earnings in the prior 12-month period. This represents an improvement from the first quarter when the growth rate was just over 6%. A similar earnings slowdown occurred in 2015/2016 with the current slowdown not as pronounced as then.The green line on the chart is beginning to turn higher and the worst of this earnings recession may be behind the market, all else being equal of course. Though, an escalating trade war will definitely put a damper on these relatively bright earnings perspectives.

Bad news for the bulls could be:

• Positive days have not yet been supported by noticeably increasing volumes, making every small rally doubtful.

• The Stochastic Oscillator hasn't been above the 50 percentile for a quite a long period of time, reinforcing potential resistance levels in the $188 zone

Looking at the SPY bulls need to see a solid move to $293-$294 supported by really strong volumes. If we break through this level, the SPY has then set a solid bottom at $282.50. Nonetheless, at this point in time, I don't rule out a potential trading range with the upper end standing at $294 and the lower end being $282.

It's quite encouraging that the SPY didn't close at its lowest level of the week and with the Stochastic Oscillator near oversold territory I expect some rebounding to $294, which represents the SPY's 55 SMA (55 is a Fibonacci number). Above that level, bulls will gain confidence and can push the index to $320. For now, I'm anticipating a double bottom at $284.2, equal to the 38.2% Fibonacci retracement level. Despite some overshooting, bulls were able to stay above this point and that's critical to the mid-term technical picture.

To summarize, how does the current market outlook affect our option selling strategies? Definitely, volatility has risen sharply so we can get significantly higher premiums without lowering our success rate. However, I would still stick to in-the-money calls or out-of-the-money puts to get additional cushion while harvesting juicy premiums. Being conservative when we have to is what will set us apart from the average retail investor or option writer...