Market High Imminent – Option Expiration Will Add Fuel – Get Long

November 16, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - In my comments yesterday I told you the market was going to make a new all-time high before Thanksgiving. The price action was excellent Tuesday and we are within striking distance of that high. I believe that option expiration will "goose" the market. Option premium sellers like to short calls above major resistance. If the SPY breaks out above $219 shorts will be scrambling to buy these calls back. That will spark short covering and it will give the market the fuel it needs. In the last 18 months we haven't had a catalyst. Sluggish economic growth has kept a lid on the market and historically low interest rates have provided a safety net due to a lack of attractive investment alternatives. Stocks have chopped back-and-forth in a tight range and this would've continued if Hillary were elected. Trump has aggressive policies and the market is excited by the prospects of lower taxes and reduced business regulation. Regardless of how effective the policies are and regardless of whether or not they will be implemented, the perception is market friendly and we have a catalyst. The Fed will hike interest rates in December. That will increase market volatility. We are seeing excellent rotation within the overall market and it has been easy to day trade these moves. Stocks that shot higher after Trump's election are over-extended and they are likely to roll over. Stocks that dropped on the news are finding support and they present an excellent buying opportunity. Watch for a rotation back into tech. Today I will wait for support. The news is light and I believe the pullback on the open will be brief and shallow. Once support is established I will aggressively scale into long positions. Option expiration related moves typically occur on Wednesday and Thursday. Get long and look for a steady grind higher today. If by chance the market makes a new low after the first hour, be patient and wait for the next support level. I doubt we will get below SPY $217.60 today. . . image

Daily Bulletin Continues...

Want Full Access?

Become a Member

Start Free Trial

No credit card required.


Previous Bulletin

November 15, 2016

Next Bulletin

November 17, 2016