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Here’s the Set-Up We Want
www.oneoption.com
We don’t always get what we want… but it is Christmas!
PRE-OPEN MARKET COMMENTS MONDAY – You know from my video yesterday that I am market neutral. There’s still some upside to the $620 level, but the upside rewards are smaller than the downside risks. The candle bodies are tiny and the volume is light. The action the last week has been largely program driven.
There’s only one pattern that interests me the rest of the year. If you are a longer-term swing trader you should be in cash. There might be an opportunity for a short-term swing trade in here, but we need this set-up. If we don’t get it, we sit on our hands and we try to find a few day trades.
We need a market pullback to at least $602 in the next two days. I would like a drop to $600 even more. It has to feel like the market is rolling over into the FOMC Statement Wednesday. That will attract shorts and we need that. The market does not have a catalyst and at these heights, Asset Managers are not interested. They will buy dips, but they won’t chase breakouts. If bearish speculators get short the next few days, Asset Managers will support the market and they will buy. The short covering will add fuel to the move and institutions will “goose” the move as they rollout of positions into triple witching. This could fuel us to a new all-time high this week. The market trend is up and we have seasonal strength. We don’t want to fade these powerful forces and that is why our best scenario is to buy a dip. Also realize that a move of this nature is completely “fabricated”. It has nothing to do with fundamental changes and the gains can easily be reversed in January.
The issue is that we might not get a dip. The futures are up 16 points this morning and that gap up needs to get smacked down.
The Fed is expected to cut rates by 25 basis points Wednesday, but interest rates have been creeping higher. That is a “disconnect” and it might be signaling a Fed pause. In any event, the only way I would feel comfortable getting long on a short-term swing basis is if we get another probe lower. That will provide a good entry point. If we don’t get it, stick to day trading.
Tech stocks held strong Friday so I would focus there if we get the market dip.
Support is at $602 and resistance is at the all-time high.
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