Market Will Grind Higher This Week – No Spoilers On the Calendar – Use Stops

November 10, 2014
Author: Peter Stolcers, Founder of OneOption

Posted 9:50 AM ET - Last week, the market was able to hold the breakout. We briefly pulled back and filled the gap from October 31st. That instant snap-back indicates that the bid is strong and we are likely to move higher. I've been advising you to get long and you won't hear me say that from this point forward. You should already have your position on and we are switching into management mode. Use SPY $202 as your stop and move it higher as the market rallies. I am long calls (35% of my normal position). They are in the money and have a delta greater than .8. These options will move point for point with the underlying and my exposure to time decay is minimal I do not plan on adding. These calls give me some overnight exposure in the event that we gap higher. Earlier in the month, I sold out of the money put credit spreads. I bought those back, lock-in profits and released margin. Last week, I sold those put spreads closer to the money (rolled up). This strategy has a bullish bias and it provides some breathing room because they are out of the money. A gradual grind higher would be perfect. I'm also day trading the S&P futures from the long side so that I can participate in intraday momentum. This combination of positions limits my overnight risk and my exposure to time decay. The news the last two weeks has been bullish and I don't see any spoilers this week. The next significant news will come on Thursday when China posts GDP, industrial production and retail sales. These numbers should be good. The EU will post GDP on Friday and this could weigh on the market. Any news from Europe is likely to be negative. US retail sales will be released on Friday. This could be an important number because retailers are about to post earnings. Analysts will try to determine if lower gasoline prices are stimulating consumption. On Friday, we will also get a round of Fed Speak. The FOMC does not meet until December and the reaction should be benign. Central banks are easing, interest rates are near historic lows, Ebola outbreaks are decreasing, global economic activity is stable, corporate earnings have been excellent and Asset Managers are worried that they will miss a year-end rally. Look for a bullish bias this week. I am not expecting a massive rally, just a steady grind higher. As long as the market does not get ahead of itself, we should not see any big pullbacks. I'm starting to notice a pattern where we see a little weakness early in the day and strength into the close. This is also bullish. Use SPY $202 as your stop. We will gradually move our stop higher as the market advances. . . image

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