We Went To the Bank and Took Profits – Wait For A Market Pullback

December 5, 2017
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - Yesterday the market rallied after Senate Republicans passed the tax bill. The initial reaction was positive, but tech stocks dragged the entire market down. This was a "sell the news" event and the S&P 500 finished the day in negative territory. This price action tells me that future gains will be hard-fought. The GOP still has a lot of work to do. They want to have a tax bill on Trump's desk by December 15th. If Republicans lose Alabama the new Senator will take office as soon as December 26th and the one vote margin of victory will be gone. In the midst of all of this a continuing resolution needs to be passed to avoid a government shutdown. The FOMC will hike interest rates a week from tomorrow. There are changes at the helm (Powell) and that could add a little nervousness. Economic numbers have been excellent and ISM services will be posted after the open. I am expecting a good number, but it won't have much of a market impact. Swing traders should have taken profits on call positions when the SPY closed below $265 yesterday. We got long at $259 and that was an excellent trade. Hopefully you can buy a few more Christmas presents. I don't see taking new long position unless we get a decent pullback to $260. Good entry points are critical at this stage of the rally. I am watching tech stocks and I will let you know if there are signs of life. The QQQ might present a year-end opportunity. Day traders should watch the early action. I expect to see more selling this morning. Asset Managers will gauge profit-taking. A steady drip lower would be bearish for the day and buyers will pull bids. One of my cardinal rules is that I don't short the market into year-end. I will only be looking for buying opportunities. If the market finds support I will trade from the long side. Stocks rallied ahead of the tax bill and that news is priced in. Alabama elections, a possible government shutdown, tax bill delays in the House/Senate and a likely rate hike next week will keep a lid on the market. . . image

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