If the Market Closes Above SPY $212 I Will Sell My Puts and Watch

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

Posted 10:30 AM ET - Last Thursday the market sold off and it looked like it was poised to roll over. Buyers rushed in Friday and they erased all of the losses from the prior day. The S&P 500 is up 10 points this morning and we are within striking distance of the all-time high. Global economic conditions are weakening and central banks are easing. These two offsetting forces have buyers and sellers are paired off. The market is trading in a tight range and it lacks a catalyst. ISM services will be released Tuesday, ADP will be released Wednesday and the jobs report will be released Friday. Employment conditions are likely to improve from the 126K posted last month and the consensus estimate is 215K. Mega cap tech stocks have posted results and these are some of the strongest companies. The results were decent, but they were not good enough to push us through resistance. The earnings from this point forward will be soft. The market is near an all-time high and we will see if it has enough strength to breakout. If it does, I will simply evaluate. I will not get long at this juncture. A week ago, the market made a new intraday high. I started to get long and I was quickly shaken out of my positions. A handful of timely day trades saved the day and I came away unscathed. I learned that I don't have any staying power on the long side because of my bearish bias. At the first sign of trouble I wanted to bail on my long positions and I wanted to get short. I am long puts on stocks. I was out of the office Friday and I forced myself not to look at the market. My positions are small. If the stocks that I'm short stay below resistance, I will stay in. If they breakout, I will exit the trades. I will also exit short positions if the market is able to close above SPY $212. My entry prices are fairly good on these puts and the stocks have been weak. I day traded from the short side on Thursday and those profits are softening the blow this morning. Even if we get the sell-off I was looking for, I will not ramp up until we close below the 100-Day MA. I also need to have a negative driver (i.e. Greek default, Fed) to lean on. A move in either direction will not be sustained without a driver. I would welcome a breakout today so that we can get on with business. The price action will improve dramatically if we can close above SPY $212. If we make a new high, I will exit my put positions, but I will not buy calls. I will evaluate from the sidelines and I will be watching for signs of exhaustion. The S&P is a couple of points from the all-time high at this moment. image

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