Market Will Rally – Small Pop In Oil Worth 50 S&P Points – This Is the Earnings Sweet Spot

Posted 9:40 AM ET - Yesterday the market shouldered weak guidance from tech giant Apple. The energy sector pushed stocks higher early in the day and oil has stabilized. The S&P 500 rallied 10 points this morning on rumors that Saudi Arabia is considering production cuts. The FOMC statement was as dovish as it could be. The Fed is concerned with economic growth and that pushes any possible rate hike back to June (at earliest). This will diminish the importance of next week's jobs report. We still want to see a print above 200K. I didn't understand the negative reaction to the FOMC statement. Sluggish economic growth should not be a surprise. Dovish remarks were expected and traders bought the rumor and sold the news. After the close, Facebook posted a great number. Amazon and Microsoft will announce after the close today and the results should be strong. Google will post after the close Monday. We are in the earnings sweet spot and confidence will grow. Official PMI's will be posted Monday morning and China should be better than feared. The PBOC injected massive liquidity overnight. Earnings should be good the next two weeks. Any rise in oil prices will lift the energy sector and it could easily be worth 50 S&P points. A base is starting to form at SPY $187.50. That support level needs to hold. I'm expecting the market to rally to SPY $200. Worst case, I expect it to tread water through February option expiration. My primary options trading strategy is to sell out of the money bullish put spreads on companies that have posted strong earnings. For more information on this option trading strategy, please read my comments from yesterday. I have also been day trading stocks. When the market is moving higher I am buying stocks that have broken through horizontal resistance after a period of consolidation. I'm also looking for a buy signal from my system and high-volume. When the market sells off, I exit my stock positions and I short the S&P futures. I don’t want to be scattered across many stocks when I short. I need to be able to take profits quickly and the e-mini futures let me do that. There are two keys to trading this market. On a swing trading basis, sell out of the money bullish put spreads. On a day trading basis, remain flexible and use the first hour range as your guide. Look for the market to grind higher over the next two weeks. . .

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