Buy Calls If the Market Makes A New High With Buying Into the Close

February 6, 2017
Author: Peter Stolcers, Founder of OneOption

Posted 9:00 AM ET - The market staged a nice rally Friday after a strong jobs report. The breakout two weeks ago has been successfully tested and we are within striking distance of the all-time high. The price action remains choppy and we need to see follow-through buying in the next few days. Earnings season has been decent, but mega cap tech stocks have reported and we won't have that catalyst. The Fed was unanimous in this decision to keep rates unchanged. They said employment growth is improving and economic risks are balanced. This was a fairly dovish FOMC statement and the market barely reacted. Most analysts believe that the next rate hike will come in June. President Trump has promised lower corporate taxes and reduced business regulation. That is keeping buyers engaged, but we see nervous jitters every time he talks about tariffs and fair trade. There is a little selling pressure this morning and the S&P 500 is down five points before the open. I would like to see an early probe for support and a quick recovery. If this happens we will grind higher and take out the all-time high. The price action still lacks punch. Almost all of last Friday's gains came in the first hour of trading and we flat-lined the rest of the day. The longer we sit here, the more likely we are to drift back into the range. Swing traders should have some overnight calls already. Buy more calls when the market makes a new all-time high and use SPY $228.60 as your stop. Day traders, be patient and wait for support this morning. I will be trading from the long side and I believe the dip this morning will be brief. Use $228.60 as your guide (I doubt that we will get that low). I still don't trust this market. I need to see follow-through buying right away and the volume needs to pick up. The rallies have been "quick pops" and I want to see "steady grinds". Get long and maintain stops. If the market makes a new all-time high, add to positions. Stay fairly passive until we have sustained rallies with buying on the close. . . image

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