Market Green On St Pat’s Day – Small Dip Next Week – Sell Bull Put Spreads

March 18, 2016
Author: Peter Stolcers, Founder of OneOption

WATCH US MAKE MONEY TODAY - FREE TRIAL Posted 9:30 AM ET - As I mentioned in my comments yesterday, the market had everything it needed to rally. The SPY opened on its low and closed on its high. That bullish pattern has been present all week and quadruple witching fueled the move. The market is well above its 200-day moving average and we will lean on that level. The FOMC statement was much more dovish than expected and the market liked the news. Global risks have sidelined the Fed and easy money is good for commodities and emerging markets. These central bank actions won't stimulate economic growth, but they will prop up the market. The news is very light the next two weeks. Now that the S&P 500 is well above its 200-day moving average, we will start to see two-sided price action. Some Asset Managers will reduce risk while others will play catch-up. This rally has taken place without tech stocks. I am waiting for a rotation out of cyclicals and into tech. The market will tread water and this topping process will take time. Don't expect a spike and a sharp reversal. Earnings season starts on April 11th and that is typically bullish. Towards the back half of earnings season the market should falter and that sets us up for a possible decline in May. The last leg of the rally has been fueled by quadruple witching. I believe the price action will be a little soft next week and any dip will set up an opportunity to sell out of the money bullish put spreads. This option trading strategy allows us to distance ourselves from the action and we can take advantage of time decay. The 200-day moving average should hold through April options expiration. I have some overnight short positions (stock and options) and I will exit them next week. I am in the right stocks and most of my holdings were flat to slightly lower yesterday. We trade relative weakness and these stocks have not participated in the rally. I'm on the wrong side of the market and not that we are firmly above the 200-Day MA it's time to exit. I just started building these positions so my risk is small. My bias will shift from slightly bearish to slightly bullish next week. On a day trading basis, we have been finding opportunities on both sides of the market. Chat room members have been getting long and that strategy has worked well. Yesterday I found excellent shorting opportunities even though the market was in rally mode. I will focus on the short side again today. I like shorting after big market runs. Stocks with relative weakness are easy to spot and any market dip leads to fast profits. By comparison, stocks that are in rally mode are often fueled by the market. When they don't have that tailwind, the bid crumbles quickly and extra caution is needed. The market will try to rally this morning and it will stall after 90 minutes. Most of the fireworks have exploded and we will see some swings the rest of the day. The market should stay within the range that is established during the first hour today. Look for soft price action next week and prepare to sell some bullish put spreads. The news will dry up and the daily ranges will compress. . . image

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