Trump Great For Trading – Option Expiration Could Be the Catalyst For New High

November 15, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - The market is still digesting Trump's victory. His policies will lower corporate taxes and reduce business regulations. Both are good for profits and they are market friendly. I'm expecting the S&P 500 to make a new all-time high before Thanksgiving. Seasonal strength will attract buyers and the calendar is light. US GDP came in better than expected and ISM manufacturing/services were also good. China's industrial production and retail sales were also healthy. There is nothing to stand in the way of the market. Resistance at the all-time high is stiff but option expiration could provide the catalyst we need to breakthrough. Premium sellers are short calls at the all-time high and if we break through we will see a short squeeze. I'm not looking for a massive breakout ahead of the December FOMC. The Fed will hike rates and the market is likely to pull back to the breakout. Traders will be on edge and nervous jitters will dissipate. That pullback will be another buying opportunity. Stocks will grind higher into year-end on the notion that economic growth will overpower the rate hike. This rate hike will be different from the one last December. A year ago we did not have a catalyst. Trump is sparking optimism and we only need the perception that growth will improve. I'm painting a very optimistic picture. Seasonal strength is incredibly powerful this time of year and Asset Managers will bid for stocks. They want to finish the year on a positive note and they get paid incentive fees. The higher the market goes, the better their bonuses. I have been trading from the long side and everyone is making great money in the chat room. Yesterday we had many stocks that continued to grind higher all day. This is fantastic price action and I expect it to continue. Tread carefully on stocks that have jumped since the election. These stocks are over-extended and they are likely to pullback. Basic materials, cyclicals, HMOs and financials are some of the groups that have run hard. If you see a chart where the stock is up 15% in the last week, know that any day trade will be risky. Tech has been pounded and I think there are some good opportunities there. Make sure that major support levels are intact and wait for rotation back into these names. The price action will be very choppy and there will be an upward bias. Know that you will have many opportunities to get long. Be patient and wait for good entry points. Today I will make sure that the early rally is holding before I buy. I will use the first 30 minutes to find relative strength. If the market is above the first hour high, you can trade from the long side with greater confidence and increase your size. Support is at SPY $215.50. . . image

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