The Backdrop Is Bullish – Use SPY $202 As Your Guide – Buy Call If We Close Above It

Posted 10:00 AM ET - I hosted a webinar last night and I used my system to find new trades. CLICK HERE TO WATCH THE WEBINAR The market staged a late day rally yesterday and it closed at a new high. This morning, the futures are grinding higher. Stocks want to run and you should buy this breakout. I hate loading up at an all-time high, so this is my tactic. I rolled up my put credit spreads on Tuesday. That means I bought back my farther out of the money spreads for profit and I released margin. Then, I sold put spreads that were closer to the money. This strategy still gives me breathing room. When the SPY closed above $202 yesterday, I bought some calls. I'm keeping my position relatively small (20% of max). I am also day trading the S&P futures from the long side. The combination of all three gives me maximum flexibility and I can keep my overnight exposure relatively small. The market tried to pull back on Tuesday. We filled in the gap from Friday (barely) and buyers immediately stepped in. This was a sign that the bid is strong. Asset Managers don't want to miss a year-end rally and bullish speculators will buy this breakout. The ECB did not do anything today and that was expected. In general, central banks are very accommodative (ECB, PBOC and BOJ). The Fed kept the phrase "considerable time" in their statement and they will not meet until December. That means we have six weeks to run. Economic conditions in Europe are dismal, but they are not falling off a cliff. China's growth is stable at 7.5%. Domestic economic conditions are excellent. ISM manufacturing and ISM services were strong. ADP reported 230,000 new jobs in the private sector during the month of October and that bodes well for tomorrow's Unemployment Report. Corporate profits are at record highs and growth has not been the strong in many years. The GOP controls the Senate and the House. Landslide victories could help them reduce regulations and that is good for business. Seasonal strength will fuel this rally. I like buying in the money calls that have a very high delta (.8+). These move point for point with the underlying and I'm not paying much for time value. I believe the market will grind higher for the next few weeks. The price action the last few days has been spotty. The pattern features a gap on the open and then the range is tight the rest of the day. I would like to see a gradual grind higher with follow through late in the day. If you see this, add to your positions. Use SPY $202 as your stop. As your positions become profitable, raise your stops. . .

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