Oil Down – Watch For Rotation Out of Basic Materials and Into Tech

December 6, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM - Monday the market was able to rally off of the SPY $219.25 breakout and it held the gains. Stocks are inching higher before the open and the price action looks decent. Oil is retreating and that should weigh on basic materials stocks. They are a bit over-extended. Watch for a rotation back into tech. ISM services came in better than expected yesterday and global economic conditions are improving. The trading range was very compressed yesterday after the initial move. Volume is light and it will remain that way until the FOMC a week from tomorrow. I expect to see choppy trading and some nervousness ahead of the Fed's decision. An interest rate hike is baked in. Traders will try to gauge the timing of the next move from the FOMC statement. With a new president at the helm and tenuous job growth I believe the Fed will be cautious. They will set the timeline for the back half of 2017 and the market will like the news. Any decline into the FOMC will present a nice buying opportunity. Seasonal strength and the thought of lower corporate tax rates/business regulation will attract buyers into year-end. Today I will wait for a market move and then I will evaluate the strength of the move. I will either join it if it is strong or fade it if it lacks punch. My gut tells me that we will trade in a tight range today so I am more inclined to fade the early move. I'm only looking for five or six good trades. I have reduced my size and I am keeping my trading activity to a minimum. This is a low probability market environment. Be very selective and set passive targets. Tech might provide some nice bullish opportunities today. . . image

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