Stock Option Trading Strategy – Stay long calls in commodity stocks, heavy equipment and tech.

A rally in overseas markets spilled over to our market this morning. Traders are still digesting the Fed’s surprise move last week. For the time being, the path of least resistance is higher. There are very few earnings reports scheduled this week and the market will not have that influence. The economic numbers during the first part of the week are also very light. Tomorrow we get consumer confidence and existing home sales. I don't view either number as market moving. Dismal home sales are expected and the only surprise would be to the upside. Wednesday, durable goods orders will be released. That number will shed some light on the strength of the consumer. Thursday the GDP will be released and Friday the Chicago PMI, core PCE, and personal income/spending numbers will come out. All of these economic releases are backward looking and I don't expect to see any big declines. I believe the Fed was worried about what lies ahead and they lowered interest rates as a preemptive measure. Consequently, I believe the market will continue to push higher this week in the absence of any bad news. End-of-month/beginning of month fund buying will also fuel the market. In the chart I have drawn support and resistance levels. As long as the support holds, maintain a bullish bias. Commodity stocks, heavy equipment, and tech are leading the way. If the market breaks support and hits an "air pocket", I would look to short retail stocks.

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