Market Needs To Finish Above SPY $191.50 Today – This Is the Sweet Spot

January 29, 2016
Author: Peter Stolcers, Founder of OneOption

CLICK HERE AND TAKE THE 1 WEEK FREE TRIAL Posted 9:30 AM ET - The market is moving higher, but the gains are hard-fought. After establishing a capitulation low, the market should release with ease and that is not the case. Thursday we needed help from oil and we can't count on that day-to-day. This is the earnings sweet spot and the gains should be coming with ease. The resistance I've witnessed this week has me questioning my SPY $200 target. Microsoft beat estimates and Amazon missed. Monday Google will post after the close and the results should be good. The SPY needs to close above $191.50 today. The PBOC has been injecting liquidity like mad and the BOJ eased in a surprise move overnight. This is providing a temporary "sugar high" this morning. GDP came in at .7% this morning. That is a dismal number and we can expect ISM manufacturing to be dismal next week. Official PMI's will be posted Monday. China will be better than feared and we will see global sluggishness. As I mentioned earlier, these gains should be coming with ease after a capitulation low. Shorts should be running for cover and Asset Managers should be aggressively bidding for stocks. That is not happening and the headwinds are strong. Shorts have not been shaken out of positions and Asset Managers are not worried that they will miss the next big rally. If it sounds like I am turning more bearish, I am. I sold out of the money bullish put spreads. This options trading strategy gives me plenty of breathing room and I can take advantage of time decay. If the market simply treads water for the next two weeks I will make money. This week I took profits on FB and AMZN put spreads. Today I will take profits on my GOOG bullish put spread. I mentioned selling these put spreads when we capitulated last week. Before we throw in the towel on this rally, let's see if we get above the high of the week. I will continue to sell out of the money put credit spreads on stocks that report strong earnings. If the SPY falls below $187.50 I will hedge these positions by shorting the S&P futures. As long as the stock maintains technical support, I will let time decay work in my favor and the hedge will provide a safety net. If the market continues to chop around, I will not need to hedge. I will be using the first hour range as my day trading guide today. We are above the high, I will focus on longs. If we are below it, I will focus on shorts. Let's see if the SPY can finish the week above $191.50. Ideally, the market won't need help from oil to do it. Sell out of the money bullish put spreads on strong stocks with the expectation that SPY $187.50 will hold through February options expiration. If the market goes negative after the first hour, hold off on new bullish put spreads . . image

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