Stock Option Trading Strategy – Wait To See If The Market Can Breakout On Earnings!

Yesterday traders came in after Tuesday's decline and they supported the market in a big way. After choppy early morning trading, investors open up their wallets and started buying stocks. The news from Tuesday was not that destructive. Chairman Bernanke was just delivering a prepared speech. The Moody’s downgrade of the subprime lenders should have been widely expected. Throughout the day the market gradually climbed higher and it gapped up near the close. This morning the retail sales number came out better than expected and worries over the strength of consumers were quickly dashed. The market is trading much higher and the losses from Tuesday have been wiped out. We are knocking on the door of an all-time high. As you can see in today's chart, tech stocks have made a multi-year high. Without strength from the financial sector, the market will need strength from tech stocks if it is going to mount a sustained rally. There isn't much news to drive the market the rest of the week, however, GE releases earnings before the open tomorrow. I suspect that their industrial divisions will more than offset weakness in their financing divisions. The stock is near a three-year breakout and this news could be the catalyst that pushes it through. I was hoping for a pullback this week so that I could get long ahead of earnings and expiration week. That never happened and I will wait to see what happens when the market tries once again to make new all-time highs. If it breaks out, I will join in. If the market pulls back on weak earnings news, I will keep my powder dry. I do plan on trading earnings news. I will be primarily focused on energy stocks, heavy equipment manufacturers and global construction companies. For today, the market looks strong and I expected to hold the current rally. However, I'm not expecting it to make new all-time highs today and it is right up against that resistance level.

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