Market Will Breakout – Look For Horizontal Breakouts – Buy Deep In the Money Calls

Posted 10:30 AM ET - Last night I recorded my webinar and we found lots of new trades. CLICK HERE TO WATCH THE WEBINAR Yesterday, the SPY challenged the all-time high. The brief decline on Cyber Monday lasted one day and that tells me that buyers are still engaged. The economic news this week has been excellent. ISM manufacturing, ISM services, ADP, the Beige Book and initial jobless claims were excellent. Analysts are expecting 225,000 new jobs tomorrow and anything close will be market friendly. The Fed is worried about disinflation and it will remain accommodative. Most analysts believe that the tightening timetable has been pushed back. That means that strong economic news will not spoil the rally. Republicans control the House and the Senate and the debt ceiling will be extended. When this happens, the news could push the market higher. The ECB, BOJ and PBOC have been easing. This is providing a tailwind for the market. Earnings season was excellent and corporate buybacks are at a record level. I bought a few calls Wednesday and I will buy more today if the market can rally above yesterday's close. I sold some call spreads last week and they benefited from time decay. I bought some back yesterday and I will buy the rest back today. Look for stocks that are breaking through horizontal resistance. Buy deep in the money calls that are trading near intrinsic value (parity). These will move point for point with the underlying stock and you won't be exposed to time decay. Bullish markets tend to open weak and finish strong. The market has been able to post gains ahead of the jobs report and I believe we will see a grind higher this afternoon. Keep your size relatively small. . .

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