Strong GDP Insures Dec Rate Hike – If SPY $212 Fails – Buy Some Puts

October 28, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - It is typical for the market to rally at the end of October and into the beginning of November. We are not seeing any buying this week and that is a warning sign. Google and Amazon were not able to provide a lift and this will embolden shorts. The SPY is one small move away from challenging major support at $212 and we need to be cautious today. The market has not been able to close above SPY $214 so I am not long any calls overnight. GDP came in at 2.9% and it insurers a rate hike in December. Hillary will tout this number for the next two weeks. I'm surprised that the government didn't report it above 3%. This would represent the first quarter of 3% growth or better during Obama's tenure. I don't trust the number and we will see downward revisions after the election. Think my conspiracy theory is flawed? In 2012 the government rigged the unemployment numbers before the election to get the rate below 7%. We know this because the Bureau of Labor statistics reported the fraud 6 months after the fact. Of course it did not get any media coverage. In any case, I believe the downside will be tested early this morning. SPY $212 is easily within striking distance and that support level needs to hold. If we close below it, I will buy some puts and I will hold them over the weekend. I also like being long VIX calls. The FOMC meeting is next Wednesday and any hint of a December rate hike will spook investors. The election is a week later and the polls are tightening. This also adds uncertainty. I will be trading from the short side early today. If support is tested and it holds, I will start scaling into long positions after an hour. Realize that the market has been in an extremely tight range since July. It will take a major piece of news to break us out. If technical support is breached I will not load up. I need to see follow-through and I would also like to see late day selling. Without these ingredients, any breakdown is simply another head fake. Use extra caution today and make sure that support at $212 holds. If that level fails, buy some puts and hold them over the weekend. . . image

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