Selling Pressure Needs To Return Today – If the Market Grinds Higher – Exit Puts

Posted at 9:30 AM ET (Market Open) - Yesterday the market probed for support right out of the gate. An early low was established and the selling momentum never had a chance to build. Bullish speculators will not be flushed out unless we get follow-through selling today. This is the low end of the trading range and some Asset Managers are nibbling. They will only pull their bids if they see persistent selling. The market is poised to rally on the open. If this move gains traction, exit put positions. If the move stalls and we see a gradual drift lower, hang on to your put positions. I don't suggest adding ahead of the weekend. We will get a heavy dose of economic releases next week. Traders will be looking for improvement in the US now that temperatures are starting to rise. China's PMI will be soft, but the focus has been on upcoming fiscal stimulus programs. The character of the market is changing. Bonds are rallying in the midst of tapering and this could be a flight to safety. Option implied volatilities have been rising and that is a sign of hedging. The selling pressure has been persistent the last few weeks and we are seeing profit-taking. This is a critical day. Support at SPY $185 needs to fail today. If it does not, we will drift back into the middle of the trading range. Keep your position small and watch for late day selling. Use a close above SPY $185 as your stop for your puts. . .

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