Global Market Rally – US Breakout Gains Traction – Sell Put Spreads

Posted 9:30 AM ET - Yesterday, the market inched higher and we saw follow-through buying. The breakout has been confirmed and stocks are moving higher this morning. China was up 3% and Europe was up 1.5% overnight. We are likely to see a light volume rally this week. Don't look for massive gains, just a steady grind higher. This environment is perfect for selling put credit spreads. Distance yourself from the action and take advantage of time decay. I still don't trust this rally. The path of least resistance is up and we are in a news vacuum the next two weeks. The FOMC minutes should be benign tomorrow. Flash PMI's on Thursday should be soft, but the market won't care. The Fed is dovish and so are global central banks. Retailers have been reporting soft results as expected. Analysts are blaming bad weather and while the stocks are trading lower, the damage is relatively contained. My bullish put spreads are in great shape and this rally is providing plenty of breathing room. Time decay will kick in and the positions have been easy to manage. I will start to hedge if the breakout fails and we fall back below SPY $212. I am also trading low-priced stocks that are breaking out through horizontal resistance. I don't have to worry about time decay and I can hang onto the position while the move gains traction. Look for heavy volume on the breakout. These moves are sustained and they can the last few days or more. When the momentum slows, take profits. The only potential speed bump is Greece. They almost skipped an IMF payment last week and this would have spooked investors. They have major financing to secure in the next few weeks. If this comes to a head before the end of the month, I will be ready to hedge my positions. If a week or two passes, my bullish put spreads will be in great shape and I will be able to take profits/reduce risk. Look for quiet trading with an upward bias this week. The global rally overnight could spark some buying this morning. . .

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