Stock Option Trading Strategy – Exit Longs And Keep Your Powder Dry Until Next Week.

Yesterday the market started off on a quiet note. As the morning progressed, weak housing numbers weighed on the market in the selling momentum up picked up speed. The market was not able to stage a late day rally, breaking that steak at seven days. It looked like prices might try and move higher with 30 minutes of trading left, but the S&P futures dropped quickly right into the bell. This morning European markets are down and that has created additional selling pressure on our market. Stocks are continuing to drift lower throughout the morning and it seems like the "bid" to the market has suddenly disappeared. I’m not a big fan of the consumer confidence number and there isn’t a negative news story to justify the decline. I believe that traders are nervous about the next FOMC meeting. Many people feel that the Fed will be steadfast in its fight against inflation and they fear that immediate action needed to be taken to avoid a recession. The market is already factoring in a .25% ease. I feel that there will be credit aftershocks for the next few months and we can expect declines of this nature. I don't like the fact that the SPY is below 146 and I am going to step aside during this light volume week. I still suspect that we will see end of month buying and that it will stabilize prices the rest of the week. It does not make sense to trade this market. Since we are below SPY 146, start paring back your longs and wait for a better trading environment next week.

Daily Bulletin Continues...