Posted by Pete Stolcers on October 24

Posted 9:30 AM ET – Yesterday we saw a buyers boycott on a quiet news day. Once the momentum was established buyers pulled bids so that they can gauge the selling pressure. The volume remained light (low level of profit taking) and the market closed on the low of the day.

I don’t like new all-time highs that reverse forming an engulfing pattern. Normally this would signal a top. I’m willing to discount the price action as a one-day event on the notion that seasonal strength and earnings season will attract buyers. Stocks need to recover today and I don’t want the market to look back for a week.

The S&P 500 companies that have reported have exceeded estimates 70% of the time. The earnings this morning where good and stocks are bouncing.

Early rallies have had a tendency to reverse. I don’t want to see that today. Buyers need to demonstrate an appetite for stocks and I want to see a steady grind higher.

Swing traders should own November and December calls. Use SPY $255 as your stop on a closing basis. If the gains this morning vaporize, I will start to reduce risk.

Day traders need to be cautious when the market opens higher. I mentioned yesterday that I don’t even day trade when this happens. Intraday volatility has dropped dramatically and I am more focused on swing trades. On days when the market opens lower, I wait for support and I buy the S&P 500 futures.

Earnings season is going to jump into high gear. This is when I expect to see some buying. GOOG, MSFT, INTC, BIDU and AMZN report after the close on Thursday and that should keep buyers engaged. Look for a steady grind higher today.

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