Jobs Number Was Good – Buy Calls Above the 200-Day MA

December 4, 2015
Author: Peter Stolcers, Founder of OneOption

TAKE THE TRIAL AND WATCH US TRADE THIS BOUNCE IN THE CHAT ROOM Posted 9:45 M ET - Yesterday domestic terrorism and a soft ISM services number weighed on the market. Once the selling momentum was established, Asset Managers pulled bids and the 200-day moving average was breached. That is a bigger move than I expected and the 100-day moving average could be in play. The Unemployment Report showed that 211,000 jobs were created in November. That was a fairly strong number and 35,000 jobs were added to September and October. This guarantees a rate hike in two weeks. Liftoff is priced into the market. If stocks can shoulder a tiny quarter-point rate hike, we are in bad shape. This increase should not impact economic activity and I look forward to getting the first move under our belt. The FOMC statement will include the word "gradual" and that should be market friendly. I'm expecting a year-end rally. Yesterday's decline set us up with a very nice buying opportunity. We have to wait for signs of support. The downside will be tested this morning and the price action will tell us when it's time to get in. If the early gains vaporized and we drift into negative territory, we could test the 100-day moving average. It is only 20 S&P 500 points away from Thursday's close and it is within striking distance. If we bounce off of that low and make a higher low, I will buy calls. This is a critical juncture. SPY $203.50 represents major support and a breach (unlikely) would be very bearish. If the market barely tests the downside and we gradually grind higher, I will day trade from the long side. If we are above the first hour high, I will buy some calls for an overnight position. If we close above the 200-day moving average, I will add. I see this as the most likely scenario. The price action will still be very choppy ahead of the FOMC. This bounce will last a couple of days. I will set targets and take profits along the way. Let the first hour play out and use the two scenarios as your guide. Seasonal strength is a very powerful force that I hate trading against. Be patient and look for opportunities to get long. This is still a low probability trading environment. However, after the big move the last two days, the probability has improved. I want to play this bounce and I will slightly increase my trading size. Be patient and look for opportunities to get long. . . image

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