Too Many Jobs – Resistance Will Hold Today – ECB Important Next Week

March 4, 2016
Author: Peter Stolcers, Founder of OneOption

1 WEEK FREE TRIAL - SEE WHAT WE ARE TRADING IN THE CHAT ROOM Posted 9:30 AM ET - The price action this week has been bullish. The SPY rallied through horizontal resistance at $195 and we've seen follow-through buying the last few days. Stocks have been opening on their low and closing on their high. This is a bullish pattern and we are challenging major resistance at SPY $200 with ease. Central bank easing has been the primary catalyst. The PBOC and BOJ have been printing money and next week the ECB is expected to join the act. Global economic conditions are horrible. Domestic economic growth came in at 1% and Europe is flat. China's economic activity continues to slip and official PMI's are below 50. Interest rates have been pushed into negative territory around the globe and central banks are out of bullets. This last "sugar high" will run its course in March and we will have an excellent shorting opportunity. Until then, let's enjoy the ride. I don't trust this rally so I want to distance myself from the action and take advantage of time decay. Bullish put spreads are the ideal option trading strategy for this environment. I won't add to these positions until the market closes above SPY $200 for a few days. That support level needs to be firm. The jobs report came in much better than expected and 242,000 jobs were created in February. That was "hot" and it might change the Fed's tone a little on March 16th. The S&P 500 surged higher and now those gains have evaporated. Some traders will feel that the number is too good and that the Fed will hike in September. This is a major resistance level and it would be unusual to surge through it on the first attempt. We are likely to chop around while we wait for economic data from China and the ECB next week. Those two events will either push us through or back us off. I feel that support at SPY $195 is solid and our bullish put spreads are in great shape. Small cap stocks have been catching a bid this week and that is where I will focus on day trading. If the stock is particularly strong I will hold overnight. I like tech, biotech, chemicals and niche players. I do not want to hold emerging market stocks overnight or basic materials. Let's see if we can get through the 100-day moving average. We will open flat so it will be easy to use the first hour range as our guide. . . image

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