Sell Your Call Options Now – Fed Will Keep Dec On the Table – Market Won’t Like It

October 28, 2015
Author: Peter Stolcers, Founder of OneOption

LET'S FIND SOME TRADES - FREE WEBINAR TONIGHT - REGISTER NOW Posted 9:30 AM ET - Take profits on bullish positions before the FOMC today. I've been hammering this theme for the last few days. The upside is limited and we are likely to see a negative reaction to the Fed's statement. Janet Yellen has not shown her hand and she is likely to make balanced remarks today. That will leave a rate hike in December on the table and the market won't like the news. Initial jobless claims have fallen to their lowest level since 2009. I believe last month’s jobs report will be revised upward. It was contrary to ADP and other job reports that showed stronger employment. The Fed has these statistics and the economy is stable. Conditions in China have also improved. Their market found support and the PBOC has done everything it can to restore confidence. Apple's iPhone sales in China were strong. The concern over China's economic decline was overblown. It could be a problem in 2016, but conditions will remain stable this year. Jobs and China kept the Fed sidelined in September. They want to hike and they want the market to be prepared. I still believe they will wait until March, but they will not disclose that. Apple's earnings were good, but the stock is only up two dollars. It won't fuel the last leg of this rally. Optimism will fade now that mega-cap tech stocks have reported. Asset Managers have been cautious. They do not fear missing a year-end rally and they don't want to chase stocks near the all-time high. At the first sign of trouble, they will pull their bids. I feel that the SPY could fall below the 200-Day MA today. It was challenged twice yesterday. Once we fall below it, bullish speculators will be flushed out and we could easily challenge the 100-Day MA the same day. Stocks are trading at a forward P/E of 17 and resistance is strong. I've seen more selling in the last few months than I have seen in years. It makes absolutely no sense to try and squeeze the last drop out of this rally. Take profits and wait for the dust to settle. If the SPY trades below the 200-Day MA today, I will day trade from the short side. If it closes below the 200-day moving average I will buy puts. If it closes below the 100-day moving average, I will buy more puts. The only way the market will rally from here is if the Fed takes a December rate hike off of the table. There is less than a 5% chance of this happening. If stocks rally after the FOMC I will wait patiently. I want to sell out of the money call credit spreads on some of the weaker groups if we rally from here. Expect lackluster trading today. We will be dead till the Fed and then all hell will break loose. I've caught the entire bounce from the August lows and I am neutral to slightly bearish. Take profits on call positions before the FOMC statement. . . image

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