Monday’s Stock Option Trading Strategy!

October 29, 2007
Author: Peter Stolcers, Founder of OneOption

Get ready for a busy week of . News will dictate price action and this is a good time to get long call . Overnight, China, India, South Korea, Malaysia and Indonesia all had record setting market moves. The Hang Seng was up nearly 4% and India's Sensex was up by the same percentage. Global strength is dragging our market higher by its hair. Trading started off on a solid note, but the price action has quieted down. This is the calm before the storm. Tomorrow, we will hear from the Fed. A .25% rate cut is expected. I believe that even if the FOMC does not yield net result, the market can rally with some dovish rhetoric. On Friday we will also get the Unemployment Report. With the exception of the August release, all of the other employment releases have generated a positive reaction this year. This is one of the busiest earnings weeks and we will get a feel for how the quarter is going to come in. To date, if you back out financial stocks, the earnings growth rate stands at 3%. That is better than most analysts forecasted. Today's chart does not give us much to go on. The market is within striking distance of a new all-time high. It was able to find support at the SPY 150 level. An even more significant support level is SPY 146. You can't see it in the chart, but that horizontal level represents the breakout in April. I believe that all of the news this week will generate a catalyst that propels the market to new highs. That is the path of least resistance. Global markets are up, we will have a mix of earnings from various sectors, the market has been able to weather the bad news from the financial stocks, the employment picture is sound, interest rates are relatively low and we might get a rate cut, inflation is in check and we are entering the most seasonally bullish period of the year. Look for a quiet day today. There is a chance that the market will grind higher on the belief that the Fed will lower rates tomorrow. Get long commodity stocks and tech (excluding semis). image

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