Look For A Quiet Week With An Upward Bias – Sell Bull Put Spreads

Posted 12:00 PM ET - Last week the market got what it wanted. As expected, the Fed removed the word "patient" from the statement and it softened the blow with dovish comments. They can raise rates at any time, but that is highly unlikely due to fragile economic conditions. The market liked the news, but it did not challenge the high. The SPY is above $209 and that is support. Earnings season is two weeks away and that should keep a bid under the market. I question the strength of this five-year bull market. When the fate of investors is held hostage by one tiny country (Greece) or one word in an FOMC statement (patient) you have to wonder. Bull markets run higher on strong economic activity and robust earnings. Central bank money printing continues and each announcement barely generates a spark. Without QE, global equities would fall like a rock. Interest rates are at 0% and in some cases they are negative. Central banks are out of bullets and the world will be forced to go through a normal economic cycle. The market is worried about a tiny little quarter-point rate hike from 0% and I believe traders are missing the greater threat. Economic conditions are slipping and there is nothing that can be done to stop the bleeding. Eventually, credit issues will be revealed. Almost half of the states increased the minimum wage and that will take a bite out of corporate profits. Wages are the highest input cost. Furthermore, the dollar rally will reduce earnings. I believe we could see many "misses" this quarter. Asset Managers will buy dips, but they will not chase. When the market challenges the all-time high, we see a wave of profit-taking. The S&P 500 has been trapped in a range for six months and I don't see a catalyst to break us out. Consequently, I am waiting for a small rally that ultimately reverses. Flash PMI's will be released tomorrow. This is the biggest news release of the week and China will be of primary interest. I am selling out of the money put credit spreads (bullish put spreads). This will keep me a safe distance from the action and I can take advantage of time decay. If we get a down day, I will hedge by shorting the S&P futures intraday. SPY $209 is key support and it needs to hold. Look for a quiet week with a small upward bias. The all-time high will provide a headwind. . .

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