Buy Calls If the Market Breaks Out – Bid Is Building and Dip Less Likely

Posted 9:30 AM ET - The market is compressing in a very tight range near the all-time high. It is gathering strength for a breakout and the chances of a one-day drop decrease daily. Earnings season will be in full bloom in a few days and that will attract buyers. The strongest companies announce early in the cycle. Bank stocks feel tired after a good run. J.P. Morgan Chase and Citigroup retreated slightly after the news. Big banks will dominate earnings the next few days and that will keep a tiny lid on the market. Mega cap tech stocks are on deck and they will gather strength before they post. The market is searching for a catalyst and Q3 guidance hit its highest level in five years. The Fed minutes were dovish and that was market friendly. This speed bump never materialized. Trump can't get Congress to act so he is taking matters into his own hands. His executive order will allow insurance companies to compete across state lines. This "end around" will put pressure on “the swamp” and it might push Congress closer to budget reconciliation deal and a tax cut bill. Neither party wants to be outsmarted by Trump. Swing traders should be long November and December calls. The chances of a "nasty" day will be minimal after next Wednesday. If you are on the sidelines waiting for an entry opportunity, you might not get a dip. You should be prepared to buy a breakout. This next little run will likely be the last decent move of the year. If the SPY closes at a new high – buy December calls Day traders need to be very cautious. After the overnight move the S&P 500 has compressed during the day and two point ranges are typical. Intraday volatility is down 49% year to date and I am making most of my money swing trading. My overnight risk exposure is currently light and I am waiting for a pullback or a breakout. Stay long and look for opportunities to add to your positions (buy dips or breakouts). . .

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