Buy Calls – The Market Will Breakout This Week

Posted 9:30 AM ET - We will never forget. Last week there was an important development that should push the market to a new all-time high. Hurricanes were keeping a lid on the action and the damage was better than feared. My prayers go out to those who suffered losses. Stocks are moving higher this morning and the S&P 500 is poised to breakout. This will be one of the better moves we will see this fall. Trump negotiated with Democrats and the debt ceiling has been extended three months. This dark cloud would have loomed over the market for a few more weeks and the battle would've gotten nasty. Investors would wonder if a healthcare bill or tax reform could ever get passed. Now that the debt ceiling has been extended, all focus will shift to tax reform. This is really all the market cares about. Trump has built a little goodwill with Democrats and he demonstrated a willingness to negotiate. Far right conservatives are taking notice and they will lose power if they don't move to the middle. The FOMC will raise rates next week and the market seems comfortable with a rate hike in December. Richard Fisher was a steadfast hawk and he resigned (dovish event). There were rumors that Janet Yellen will stay on (stability). Earnings season was excellent and the guidance was strong. Economic numbers have been stable and in some cases strong. The market typically pulls back in September and it rebounds late in October. I don't believe we will see a market decline. Look for a breakout and a gradual grind higher. It will be a “three steps forward, two steps backwards” process. This is not the move I was hoping for. I don't want to load up since we were not presented with an excellent buying opportunity. On a drop to the 100-day moving average I would've been much more aggressive with my longs. Swing traders should buy calls today. We could see a few days of selling into the FOMC, but any dip would present an opportunity to buy more calls. Start scaling in and use SPY $246 as your stop on a closing basis. This breakout could be the only decent momentum we see into year-end. Day traders should try to get long early this morning. Try to buy any dip. Use SPY $248 as your guide. If we are above it, trade from the long side. If we are below it, trade from the short side. . .

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