Market Trapped In No Man’s Land – FOMC Will Not Show Their Hand Next Wed

October 21, 2015
Author: Peter Stolcers, Founder of OneOption

TAKE THE 1 WEEK FREE TRIAL FOR INVESTORS AND FOLLOW OUR CALL TRADES Posted 9:50 AM ET - The market has been treading water this week and trading volumes have declined. Technically, we are trapped between support and resistance (no man's land). Fundamentally, we have a number of important events that will determine the next move. In the chart below you can see the double bottom that has formed. We were able to rally above horizontal resistance at SPY $200 and $202. The 100-day moving average is just above current levels at $204. We have horizontal resistance at SPY $205 and the 200-day moving average at $206. It will take a catalyst to move us through these resistance levels. From a fundamental standpoint, major earnings releases are just starting. Amazon, Microsoft and Google will post after the close tomorrow and I am expecting a strong bid until then. Flash PMI's will be posted Friday morning and they should be market friendly. The big news will come next week when the FOMC statement is released (October 28). If the Fed hints that rates will not go up in 2015, we will break through technical resistance. I don't believe they will show their hand and the market will stay below the 200-Day MA. The debt ceiling needs to be raised in the next two weeks and this will haunt the market. Two weeks from Friday the jobs report will be posted and traders will be nervous about a second miss. Earnings have been lackluster thus far and they are not providing much of a boost. I am long deep in the money calls and I will be scaling out of one third of my positions tomorrow. I plan to be out of all of my calls before the FOMC statement. I don't care if I miss the remaining 2% of this rally. Most of the big moves have come intraday and I believe I can catch them with day trades. This strategy will also reduce my overnight risk exposure. Asset Managers are not worried that they will miss a massive year-end rally. You don't see panic buying unless you have a sustained move that prevents them from getting in. Asset Managers have had ample opportunity to buy. Year-end rallies typically move higher in a very orderly manner. This move has come in fits and spurts. Since the last jobs number, we've only had a few big days. The rest of the time the price action has been flat. The overnight news was not that great and I can't justify the rally this morning. Earnings were okay and China was down. Sellers will probe for support this morning. We want to see an early low and a gradual grind higher. Ideally, we will see buying late in the day and we will close above the 100-day moving average. This type of action would lead to follow-through tomorrow. Take profits on some of your call positions tomorrow afternoon and plan to scale out of everything before the FOMC next Wednesday. . . image

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