Market High Will Be Tested This Week – No Profit Taking To Flush Out Bulls

Posted 9:45 AM ET - I am hosting a free webinar tonight and I will use my system to find new trades. I often speak about it, come see it in action CLICK HERE TO REGISTER The market pulled back on Cyber Monday and there was a slight chance that profit-taking would flush bullish speculators out of their positions. Yesterday, the market opened higher and it never looked back. This is a sign that profit-taking is light and that buyers are still engaged. Unfortunately, I believe we are headed for a fairly tight trading range the next two weeks. Daily volume has contracted and the market lacks a catalyst. Central banks have thrown the kitchen sink at soft economic conditions and I am not expecting any additional action into year-end. Earnings season was excellent. Corporate profits grew at their best pace in years and stock repurchases are at record levels. ISM manufacturing was better than expected and ISM services will be released 30 minutes after the open. ADP reported 208,000 new jobs and that was a little light of expectations. The Beige Book will be released this afternoon and activity should be solid. Overall, the economic news this week will be strong. Most analysts believe that the Fed 's timetable has been pushed back from May. Consequently, strong economic results should be good for the market (no fear of tightening). The GOP controls the House and Senate and the debt ceiling will be extended. This is priced into the market, but the stocks will rally when it happens. Yesterday, I sold the puts I purchased on Friday for a small profit. I was not going to let this trade turn into a loser and this position was on a very short leash. I am short out of the money put spreads from a couple of weeks ago and those positions are in great shape. I sold a handful of out of the money call credit spreads last week and they are slightly profitable. If the SPY trades above $208, I will buy them back. If the SPY closes above $208, I will buy a few in the money calls (5% of my max position). I will buy options that are trading at parity so that I can avoid time decay. The all-time high should provide resistance today and it might take a few days for us to close above it. My level of conviction is very low. It's been a great year and I don't want to give back profits. I feel that many traders share my sentiment and that is one reason that volumes are low. Look for tight ranges, low volumes and an upward bias. . .

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