Buy Put Options – The Market Will Test the 100-Day MA – If It Fails We Will Quickly Test SPY $197

Options Trading Strategy - I am out of my bullish put spreads and I am short the S&P 500. I am also buying put options and I will hold them overnight. As I write this, the S&P 500 is making a new low for the day and my gains this morning have already offset my losses from the put spreads. This is a high probability options trading opportunity and I have been aggressive this morning. My stop is SPY $203 on a closing basis. During these big overnight moves, I do my best to get my market comments posted, but I am busy trading and helping subscribers. If you want my comments before the open, Subscribe To My Trading Platform. I always post those comments before the open. It is $60/quarter and the right information on a morning like this will pay for an entire year. Now we know that Thursday's rally was nothing more than a short squeeze. Central bank easing is not stimulating economic growth and the market is tired. Earnings have disappointed and we are not going to get the bounce I was expecting. The strongest companies announce early in the earnings cycle and the news has been disappointing. Today's decline is bearish. About 90% of the time I am able to hedge my out of the money put credit spreads on an intraday basis. This overnight gap down hurt me a little, but my stocks held up well and my bullish put spreads were way out of the money. If another week had passed, I would have been able to reel them in for profit because of time decay. I bought back all of my put spreads this morning and I shorted the S&P when SPY $203 was breached. The bad news is that I lost a little money on those spreads, but the good news is that I now know which way the market is headed. I have been buying puts this morning and my sentiment has quickly changed from mildly bullish to bearish. Earnings season was our last hope for a rally. Microsoft and Caterpillar provided weak guidance. The expectations for Apple are very high and we will see if they can deliver after the close. A strong US dollar is having an impact on earnings and it will also impact exports. Greece is back in the headlines and the new leadership did not tone back the rhetoric. Credit concerns will escalate and Greek yields are jumping. Global economic conditions have been tenuous. Europe and Japan could easily slip into a recession and China has been leaking oil consistently for the last six months. The US has been the exception and this morning’s durable goods number sparked concern. It was weaker than expected and December’s number was revised down. You know from my comments that I have not trusted this rally. I felt that we might be able to tread water for a few weeks and that is why I opted for a neutral to slightly bullish strategy. The selling pressure has been steady this morning and we could easily hit an air pocket since many traders are absent (New York snowstorm). The market has tested the 100-day moving average with greater frequency and that is a bearish sign. Declines have come on heavy volume and rallies have come on light volume. This has been the heaviest selling pressure I've seen in years. December and January are typically bullish months and the buying was very light. If the 100-day moving average fails (and I expected to), we will quickly test the 200-Day MA. I am out of my bull puts spreads and I am short the S&P 500. I am also long puts and I will hold them overnight. As I write this, the S&P 500 is making a new low for the day and my gains this morning have already offset my losses from the put spreads. . . By some put options today, we are heading lower.

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