Market Movement With Volume – Great For Day Trading and Bull Put Spreads

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

Posted 9:30 AM ET - Last week the market tested support at SPY $202 and the 200-day moving average held. The action will pick up this week and we have a number of significant news releases. Q1 window dressing will spark rotation and we should have an excellent environment for day trading. Friday was a national holiday and Q4 GDP was released. Our economy grew at 1.4% and that was better than the prior reading of 1%. ADP will be released on Wednesday and we will get the jobs report on Friday. A number around 200K would be market friendly. We don't want jobs to fall below 150K and we don't want to see them above 250K. ISM manufacturing will be posted Friday and we will also get official PMI's. This is important since China no longer posts a flash PMI. After this round of news, earnings season will be on our doorstep. That usually attracts buyers. If we get an overnight gap greater than 10 S&P points, I will try to fade the opening move. After the first hour of trading, I will use that range as my guide for day trading. If we are above the first hour high, I will focus on longs. If we are below the first hour low, I will focus on shorts. This tactic has worked well for many months. The key is to find stocks with relative strength/weakness. The market has rallied considerably in the last few weeks and we have reached a level where opportunities on both sides of the market are present. I am expecting rotation out of cyclicals and into tech. Q1 window dressing might spark that rotation this week. I also like selling out of the money bullish put spreads. This option trading strategy takes advantage of time decay and I'm expecting the market to trade above $202 through April option expiration. Even if $202 fails, major support is just below it at $200. A $202 breach would be brief. We tested support last week and the market could challenge $205 this week. There is considerable overhead resistance above $205 and we should see some profit-taking if we get that high. The market needs to consolidate recent gains and I believe we will trade between $202 and $205 for the next two weeks. The action should be brisk on both sides and this is an excellent day trading environment. . . image

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