We Want A Market Decline So We Can Buy Calls Ahead Of the FOMC

Posted 9:50 AM ET - When you have nothing, you take what you've got. We are in a news vacuum and commodity stocks are weighing on the market. That is the only news and the tone is negative. The SPY closed below the 200-day moving average yesterday. We are likely to test the downside this morning. The 200-day moving average is not that significant – we have broken it with ease. The 100-day moving average is just above major horizontal support and it is much more important. I hope that we go down and test it because that will set up an excellent buying opportunity. The recent price moves are nothing but noise. We are chopping back and forth ahead of the FOMC statement next week. Asset Managers have pulled bids and air pockets like the one we saw yesterday can be expected for a few more days. Prices should firm up next Tuesday and we should see some buying Wednesday. Every FOMC meeting this year has produced a rally. The market is prepared for a quarter-point rate hike and the Fed will soften the blow with dovish rhetoric. We should see a nice rally that lasts a couple of days after the statement. I have been day trading strong stocks from the long side and this strategy has worked well this week. I'm focusing on stocks that are breaking out and I am waiting for the market to find support. As soon as it does, these stocks take off and I'm able to take profits quickly. It is very important to set targets. If you are a day trader take the 1 Week Free Trial and see what we are trading in the chat room. This is also a good environment to sell out of the money December bullish put spreads. Distance yourself from the action and let time decay work its magic. Yesterday I day traded SPY puts. I will look to do the same today if I get a nice set up. I do not hold any shorts overnight. I still believe that seasonal strength and dovish statements from the Fed will spark a rally next week. This negative tone should run its course soon and the bid will strengthen. Keep your size small, trade from the long side, set targets and take profits. . .

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