Market Is Holding Gains

February 7, 2023
Author: Peter Stolcers, Founder of OneOption

After A Heavy Dose of Earnings and the FOMC the Market Looks Strong

PRE-OPEN MARKET COMMENTS TUESDAY – Last week we got a heavy dose of earnings news and the FOMC statement was released. The market poked through resistance and it is staying close to that breakout. I view the price action as bullish. Today the Fed Chairman will speak at 12:00 PM ET. I am not expecting anything new. The longer we tread water at this level, the more bullish I get.

In December the market tested the SPY $410 level and that was the down trendline that started back in January 2022. That breakout attempt was immediately slapped down and we broke all of the major MAs in the next week and the up trendline that started in October (that was a sign of selling pressure and we are not seeing that now). The market quickly found its footing and we have a higher low. That is a sign of support. The market gradually worked its way back to the $410 area and the breakout retraced, but we have not rolled over. This tells me that the bid is still fairly strong here. We want to attack the high from last week and we want to clear it. That would be bullish and I am expecting it.

There was a “Golden Cross” and the 50-day MA is above the 200-day MA. That is typically bullish and it does not happen until there has been a bottoming process.

Swing traders can buy the $SPY on the open today. I like the price action and the only thing that would shake me out here is a breakout attempt that fails with a long red engulfing candle. If we see that, we have to exit and look for a better entry point. I am not expecting this and if I see it I will provide exit instructions. I am not afraid of what Powell might say today. We just had the FOMC statement last week. I also like selling bullish put spreads on strong stocks that are breaking through technical resistance. This is a “bread and butter” swing trading strategy that we will start using again. Sell OTM bullish put spreads below technical support and let time decay work its magic. For instance I like selling the AMD Feb (17) $79/78 bullish put spread for $.20 credit. That is below the 200-day MA and horizontal support. This stock broke out and it looks strong.

Day traders should expect dull trading for the first few hours. We are in “wait and see” mode until “Fed speak”. I would favor the long side. Be patient. The S&P 500 is down before the open and we are in a bearish 1OP cycle. See what it produces, search for some good longs and wait for the bullish cross. If the damage is relatively contained and you see tails, bullish hammers or a bullish engulf off of the lod, start scaling in. I am seeing more nice charts on the long side than the short side.

Support is at $400 and resistance is at $417.

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