Watch For Choppy Light Volume Price Action With A Bullish Bias!

The market continues to chop around in light volume as Thanksgiving approaches. Last Thursday's decline and today's rebound have come out of nowhere. Overseas markets traded higher with Europe adding more than 2% in Asia adding more than 1%. Sellers raised their offers, pushing the market higher on light volume. Existing home sales rose 10% in October and they are at a 2 1/2 year high. Buyers were taking advantage of the government's tax credit before it expired in November. This news release should support today's rally, but it did not cause it. The stock market was already up substantially before existing home sales were released. As I pointed out last week, trading tends to slow down around Thanksgiving. In three of the last five years, the market has sold off ahead of the holiday and it has rebounded into month-end. GDP, consumer confidence and the FOMC minutes will be released tomorrow. If third quarter GDP can hold its preliminary estimate of a 3.5% growth rate (released last month), the market should rally. The consensus is for a downward revision and analysts expect it to come in at 2.9%. Consumer confidence will be important as analysts try to predict holiday sales. I feel this number could come in soft and it will weigh on the market. The FOMC minutes should be cut and dry. The Fed did not change its statement much and the market is not likely to have much of a reaction to this release. We have run right back to the 2009 highs. There are two ways to approach this type of market. The first is to sell out of the money put credit spreads. I still believe prices will hold up through year-end and you should search for stocks that have strong trends in good earnings. The second approach is to day trade stocks during an intraday move where the market has momentum. With big overnight moves, you need to exit positions on a daily basis. You don't want to day trade options because the bid/ask spread is too wide. In either case, use the Daily Report - Live Update table as your guide. Focus on stocks that have consistently climbed to the top of the list. Today's rally was swift and we fell into a tight range after the first 30 minutes of trading. An afternoon breakout (SPY 111.60) or breakdown (SPY 111.30) will determine the direction into the closing bell and it will set up a day trade. Last week I started selling December out of the money put credit spreads. I don't plan on adding to positions unless we get a pullback this week. If the market rallies this afternoon, I will start selling out of the money call credit spreads on stocks that have hit resistance and have not been able to run up with the market. I believe the SPY might have 4% upside left this year. The action is starting to get heavy and I feel we are in the final innings of this rally.

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