Start Shorting Early Today – The Market Will Probe For Support

November 3, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - The market continues to search for support. We are below the 100-day moving average and key horizontal support at SPY $212. I don't believe we will see a meaningful rally until $208 is challenged and I will start shorting when the bounce this morning stalls. Fed officials are intent on raising rates in December and that came out in the statement yesterday. ADP came in at 147,000 and the jobs report will not mean much tomorrow. The polls are tightening and if the market tanks after the election, the Fed might delay the rate hike. The market is below support and bearish speculators could have been squeezed yesterday. They were not and this is a bearish sign. For the first time in many months the FOMC statement did not spark a rally. I also consider this to be bearish. Polls are tightening and that might be causing angst among Asset Managers. The bid is passive and buyers are backing off at the first sign of trouble. Wait for the early rally to run its course and start shorting as soon as the bounce stalls. I saw many great shorts yesterday and I will be on them early this morning. Look for stocks that have compressed in a tight trading range and that have broken horizontal support. The best candidates will also breach major moving averages. SINA is the type of chart I'm looking for. SPY $208 is fairly close making the downside risk relatively contained. I'm not looking for a massive breakdown before the election. Option implied volatilities have spiked and I do not advise buying puts. Short the S&P 500 futures or short individual stocks with relative weakness. After the first few hours of trading I will take my profits and I will reduce my activity. I plan to trade one and a half times my normal size this morning and my confidence level is fairly high. Once my initial shorts start to make money I will add to the positions. I will set targets and I will try to take profits into big dips. In the unlikely event that the market rallies above the first hour high, I will shift my focus to longs. I will use that first hour high as my stop. SPY $211 and $212 are resistance levels. Again, I see a rally as very unlikely today. We need to test the downside. . . image

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