Daily Commentary: December 06, 2024

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Did You Take Some Gains?

Posted by Pete Stolcers on December 06
www.oneoption.com

Swing traders should reduce risk into this final year end push higher.

PRE-OPEN MARKET COMMENTS FRIDAY – As expected, the jobs report came in strong. There were 227K jobs created in the month of November and that is better than expected (202K). The storms and strikes are over and this result is consistent with ADP and the weekly jobless claims numbers. Hourly wages were up .4% and that is on the high side. This is the largest input cost for manufacturers and it is inflationary.

It’s hard to predict where the market will finally hit resistance, but the price action suggests that we are getting close. We are seeing tiny bodied candles on light volume and that is a sign that there is selling pressure. Asset Managers are not going to chase stocks near an all-time high, but even a small bid can fuel a move higher if there are no sellers. They love marking portfolios up into year end to “goose” performance fees. Know that these gains can easily be stripped away.

There’s a chance that the SPY can get to $617, but the higher we go from here, the greater the odds of a swift round of profit taking. I view the remaining upside as limited and the downside as considerable. That means we start taking profits!

The S&P 500 rallied about 15 points after the release. It is still below the high from yesterday. From a bullish perspective, we want to see the market move through that level with ease on the first attempt. If it happens early in the day, the market has a chance to grind higher. The news will be fairly light until the FOMC Statement in 10 days. That favors the current trend. If we get this pattern, hold your swing trades during the day and if the market closes at the high of the day, take another third of the positions off. You don’t want to miss a bullish trend day and it is possible. This was a “good” number. If the market can’t get through the high from Thursday on a “good” number, I would view that as a warning sign. I would take swing gains if I see that pattern as well. We don’t have a monster gap up to a new all-time high. If we were above $610 on the open I would have suggested to sell into that rip higher especially if we had a couple of red candles into the gap in the first 30 minutes. We are not going to have that gap up. The chances of a severe round of profit taking are minimal today (10%). The news was good and no one is hitting the panic button. If the market stacks red candles during the day on volume and it takes out the low from Thursday with ease, you have to be more aggressive with your profit taking and you should consider going to cash.

The bottom line is to reduce swing risk today. Treat your remaining positions more like a day trade. Watch the action and use that as your guide.

Support and resistance are the low and high from Thursday. Odds are that we are NOT going to have an “inside day”. This should be good trading.

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