Look For Positive Action This Week. the Market Will Challenge SPY 110.

November 9, 2009
Author: Peter Stolcers, Founder of OneOption

Last week, the market was able to stabilize after a nasty decline. Prices briefly fell below the three month uptrend line that dates back to June. However, buyers stepped in last week. We now have a higher low and we are back above the trend line. From a technical perspective, the market still looks good heading into year end. Support levels are in place and this was another opportunity for Asset Managers to "buy the dip". Many are still anxious to place money and they will keep a bid to the market the rest of the year. Wall Street also has a vested interest in supporting stock prices. If we close at this level, nice bonus checks will be cut. Seasonal strength, low interest rates, solid earnings and improving economic numbers, will support the market. The last round of selling was fairly heavy and that leads me to believe that overhead resistance is strong. I feel that we will work our way back up to SPY 110, but that additional gains will be hard fought. Selling out of the money put credit spreads is the best strategy in this environment. I suggest putting them on now. In some cases you will be able to distance yourself using November options. If you have to go too close to the money to get a decent credit, consider selling December options. Less than 10% of the companies in the S&P 500 have yet to report earnings. The surprise element is gone and earnings releases should not drive the market. Towards the end of the week, we will hear from retailers. The economic news is also very light. This means that the market will run with the information it has. I am bullish this week, but not bullish enough to buy calls. I still feel that distancing myself from the action is the way to go. Look for a nice rally today and for generally positive action this week. image

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