Sinko de Mayo” – Market Looks Weak – Follow Through Selling

May 6, 2015
Author: Peter Stolcers, Founder of OneOption

I have been searching for shorts and I have my list. CLICK HERE TO TAKE THE FREE TRIAL. You will have access to my bearish trades and an exclusive chat room. Posted 10:20 AM ET - Yesterday was "sinko de Mayo". The early selling momentum gathered steam and stocks continued to sink lower the entire day. Support at SPY $210 failed and resistance at the all-time high is formidable. I did not get sucked into the rally Friday or Monday. My trading system has sell signals on 75% of the stocks in the S&P 500 when the index was at an all-time high. I'm not going to ignore this warning sign. If you are not on my system, you should be. If you have not done so, take the 1-day Free Trial and visit the chat room. There simply aren't any catalysts to push stocks through. At a forward P/E of 18 equities are a little rich. The market is at the top of the trading range and I believe the next move is down. Tuesday's decline was good for my put positions, but I'm not getting overly excited. We've seen this movie before and the market lacks follow-through. The downside will be tested this morning. If we make a new low after a few hours of trading, I will stick with my May put positions. My target is SPY $207. That is the 100-Day moving average. If we rest at that support level, I will take profits on my May puts. If we blow through support, I will wait for a capitulation low and then I will exit. Time is working against me as May option expiration approaches and my stops are tight. If the market probes for support this morning and it rallies back, I will exit my May put positions. I have been given a second chance to profit from a trade that initially went against me and it is always wise to get out and reevaluate. In the first few minutes of trading, the gains have been stripped away and the market is selling off. ADP came in at 169,000. That is below expectations and economic conditions are softening. Analysts are expecting 218K new jobs on Friday and I believe a number +/- 30K will be market friendly. Anything outside of that range will be bearish. Traders are focused on a tiny quarter-point rate hike when they should be worried about deteriorating economic conditions. Germany had a 3% down day last week and China was down 4% yesterday. This is a warning sign that those markets are getting a little frothy. Own some puts and follow the guidelines above. Let's hope for some follow-through selling. The market needs to break out of this range. . . image

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