Take Profits On Calls From Friday – Market Is Filled With Noise

Posted 9:50 AM ET - Last week the price action was volatile. The S&P 500 breached the 200-day moving average and it rebounded sharply on Friday. Once the daily momentum has been established, the market continues in that direction. High-frequency trading is fueling these moves and they are nothing but noise. This is a low probability trading environment and it will continue until the FOMC statement a week from Wednesday. The market has priced in a quarter-point rate hike and gradual tightening. We should not see another rate hike for six months. From this point forward we need strong economic data. ISM manufacturing was soft and ISM services missed expectations. The services number still came in at a healthy 55. More than 200,000 jobs were created in November and that was a good number. Last week's decline shook me out of a couple of my bullish put spreads, but the majority remained out of harm’s way. The rally Friday gave me plenty of breathing room and these positions are in great shape. That is the advantage of selling out of the money options. You can weather these choppy moves and take advantage of time decay. Given the sharp rally Friday, I didn't have a chance to enter new bullish put spreads. This week I will day trade. I want to trade from the long side and I will be active when the market is above the first hour high. Use this as your gauge. Once the momentum is established, it continues. Given the choppy price action, I want to keep my overnight risk exposure small. I suggest taking profits on your calls from Friday. Time decay will be an issue and I believe the market will be flat. Keep your powder dry and get ready for a nice year-end rally after the FOMC. . .

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