One Option Trading Blog

The Market Could Stay In A Tight Range For 2 Weeks - It Is Searching For A Catalyst

2012-02-09T15:46:00-05:00

Last week, the market was able to break out to a new relative high on better-than-expected economic releases. It rests just below major resistance at SPY 135 and traders are waiting for the next catalyst. European credit concerns have waned and earnings season is winding down. That means the focus is clearly on economic growth. ISM manufacturing, ISM services and Q4 GDP all exceeded expectations. Initial jobless claims have been drifting lower (-15,000 today) and last week's Unemployment Report showed that 243,000 jobs were added in January. Not all of the gains came from hiring (Census adjustments were made) and it …

Calendar Is Light. Look For A Small Rally Into the Close. ECB Could Provide A Spark Thurs.

2012-02-08T17:10:00-05:00

The calendar is very light and there aren't many market moving events scheduled this week. Stocks have tested the downside intraday and they have rallied back before the close. This pattern has developed in the last few days. We are caught in a range and the market is searching for its next catalyst. The news is generally positive. Rumor has it that Greece is getting closer and closer to a deal. European banks have been tapping the ECB and they are catching a bid. Bond auctions have gone well and Spain is even considering a syndicated offering. As long as interest …

Fed Speak and the ECB Should Provide A Small Bid. Quiet Week Ahead

2012-02-07T15:47:00-05:00

This has the makings of a very quiet week. Earnings season is winding down and the economic releases are light. Stocks have good momentum, but the market is bumping up against major resistance. Greece has not reached an agreement with private investors and that is weighing on the market. Unions across the country are striking and that is making investors nervous. Greek officials are trying to draft austerity measures that would lay off 15,000 public sector workers by the end of 2012. The minimum wage would be cut by 20% and they are also trying to reduce pension benefits by 20%. …

The News Is Light This Week and Stocks Will Try To Advance

2012-02-06T16:36:00-05:00

Last week, the market broke out above resistance when the jobs report came in much better than expected. PMI's in Europe and Asia were also above estimates. This is a very quiet news week and the momentum should allow stocks to inch higher. Domestic economic conditions have been outpacing the rest of the world. ISM manufacturing and ISM services came in better than expected last week and GDP rose 2.8% in the preliminary reading. The optimism is growing. Credit concerns in Europe have subsided. The ECB provided a massive liquidity injection and interest rates have declined. Greece has not reached an …

Strong Jobs Number and ISM Services Push Stocks Up To Major Resistance Level

2012-02-03T17:24:00-05:00

Today, we might have gotten the catalyst the market has been looking for. First, the jobs number came in much better than expected. Next, ISM services jumped from 53 to 56.8. The economic news was excellent and the market gaped higher on the open. Unlike the price action during the last two weeks, stocks feel like they want to grind higher. The market is challenging a major resistance level at SPY 135 and it doesn't feel like it's going to back off. This week the PMI's in Europe and Asia were pretty good. Interest rates in Europe were stable and the …

Jobs Number Looking Like A Non-Event. Lackluster Trading - Wait For A Breakout

2012-02-02T15:43:01-05:00

For the last two weeks, the market has been caught in a tight trading range. A week ago, the Fed announced the continuation of their zero rate policy through 2014. Stocks surged to a new relative high, but those gains were erased the next day. Yesterday, the market gaped higher on the open and it challenged that high midday. Profit-taking set in late in the day and resistance held. Yesterday’s gains all came overnight. During the first couple of hours, stocks barely budged. If investors were still trying to get long, we would have seen a gradual climb higher throughout the …

All of the Gains Came Overnight. - No Sustained Buying. Wait For A Breakout From This Range

2012-02-01T17:15:00-05:00

After a few down days, the market woke up. PMI's in Europe and Asia were decent and a Greek haircut agreement seems close. Even though the market is challenging resistance, it has not advanced in the last 10 days. The ECB's "bazooka" worked and confidence has temporarily been restored. Investors are less fearful of a financial crisis. Some analysts believe that the ECB's balance sheet will grow to €1.5 trillion in 2012 (biggest ever). Central banks around the world are backing the ECB and this is an "all in" strategy. If Europe fails, we all fail. Risk has not been eliminated; …

Good News Can’t Spark A Rally - The Price Action Is Bearish. Buy Puts If the SPY Closes Below 130

2012-01-31T16:29:00-05:00

Each year I run a very brief Special Offer in January to celebrate OneOption's anniversary. We have been in business 6 years and this is your chance to buy all of the research reports for an entire year at one low price. Sign-up Now and save 60%. I recorded this webinar 10 days ago and it reviews all of the products and track repords - Watch the Webinar. This is absolutlely the lowest price of the year. When the promotion ends today (January 31st) it will not be offered again in 2012. Sign-up now! …

If the Market Closes Below SPY 130, Buy Puts. Price Action Is Toppy

2012-01-30T16:40:00-05:00

Each year I run a very brief Special Offer in January to celebrate OneOption's anniversary. We have been in business 6 years and this is your chance to buy all of the research reports for an entire year at one low price. Sign-up Now and save 60%. I recorded this webinar 10 days ago and it reviews all of the products and track repords - Watch the Webinar. This is absolutlely the lowest price of the year. When the promotion ends tomorrow (January 31st) it will not be offered again in 2012. Sign-up now! …

The Market Is Approaching Major Resistance and the Price Action Feels Toppy.

2012-01-27T16:41:00-05:00

The market is basically flat for the week. On Wednesday stocks rallied to a new relative high after the Fed said that it would maintain its zero rate policy for the next two years. Those gains evaporated yesterday and earnings have not been able to push the market higher. Next week, Asian markets will reopen and trading will be back to normal. Central banks around the globe are expanding their balance sheets (printing money). They have granted the ECB unlimited access in an "all in" strategy. If Europe fails, we all fail. This strategy has temporarily eased European credit concerns. Unfortunately, …

The Printing Presses Are Running. This Was the Final Push. Watch For Signs of Selling

2012-01-26T17:06:00-05:00

The price action this week has been rather subdued. Most Asian markets have been closed to celebrate the New Year and the economic releases have been minor. Traders are focusing on earnings and the results are in line. Yesterday, the Fed provided a spark when they set a zero rate policy through 2014. The printing presses in Europe and the US are running at full speed. Stocks had a mixed reaction initially, but they eventually rallied on the news. The Dow is close to a 3 1/2 year high. Conditions feel like they are improving, but the Fed obviously has concerns. …

The Momentum Has Stalled - FOMC Should Provide an Afternoon Spark.

2012-01-25T17:16:00-05:00

The overnight news has been fairly light. Traders are focused on earnings and the results are mixed. President Obama's State of the Union Address had a few interesting items, but there weren't too many surprises. The market started off on a negative note when selling in Europe spilled over to our market. Earnings from Siemens yesterday and Ericsson today pressured stocks. Greece has still not come to terms with private investors. The coupon payment seems to be the sticking point. Analysts believe the haircut will come in around 65%. The President bashed financial institutions and we can expect new regulations. He …

State of the Union - Apple - FOMC - All Should Be Bullish. One More Push Higher.

2012-01-24T16:44:00-05:00

The market has started the year off on a positive note. It has not had a down day is January 13th and there have only been two down days all year. Yesterday, stocks looked tired and the trading range was very narrow. Overnight, the flash PMI for Europe came in at 50.4 and that was much better than expected. It is back above the expansion level. The news is good, but I would not get too excited about one data point. Months of economic releases point to a recession in Europe. Greece has still not reached an agreement with private investors. …

Rally In Final Stages. Watch For Late Day Selling and Negative “Beat” Reactions

2012-01-23T17:04:00-05:00

Last week, the market broke through major resistance and we saw follow-through buying. Stocks have rallied 10 consecutive quarters during the early part of earning season. Many of the strongest companies post results early in the cycle and optimism builds quickly. This morning, the price action is very lackluster. China's market will be closed this week as they celebrate the New Year. Many analysts anticipated a reduction in bank reserve requirements ahead of the holiday and it did not happen. Economic conditions have stabilized, but they are tenuous. Home prices in China have declined to straight months and their growth is …

The Breakout Is Holding and the Price Action Is Bullish. Mega Cap Earnings After the Close Today.

2012-01-19T17:18:00-05:00

Yesterday, the market inched higher the entire day and the breakout above SPY 130 feels legitimate. The price action was very consistent and the rally did not get ahead of itself. This stair-step pattern is bullish. I still feel there are enough dark clouds on the horizon to justify a hedged approach. The overnight news was fairly light. Earnings were in line and financials are edging higher after Bank of America and Morgan Stanley. This sector looks overbought and I believe the gains from this point forward will be hard-fought. Top line growth was below expectations and new regulations will crimp …

Market Searching For A Catalyst. Earings After the Close Thurs Will Determine Direction

2012-01-18T17:26:00-05:00

Yesterday, stocks tried to break out above resistance at SPY 130. Positive economic releases out of China (GDP, IP and retail sales) sparked a 4% rally in Shanghai. The Euro credit rating review by S&P last Friday was also in line and a relief rally unfolded early in the day. This is the type of news that could have resulted in a major breakout. However, stocks slipped throughout the day Tuesday and they briefly fell into negative territory. This morning, stocks attempted another breakout and resistance held. Goldman Sachs reported better than expected earnings, but revenues were light. This has been …

Euro Credit Reviews In Line. Good Numbers From China Not Enough To Spark A Breakout

2012-01-17T16:21:00-05:00

Last Friday, news leaked out that S&P was going to release its European credit review. The downgrades were in line with expectations and the market handled the news well. European markets were open yesterday and they traded slightly higher. The biggest concern was that France might get downgraded two notches and that Germany might also get downgraded. This did not transpire. France was only downgraded one notch and Germany was not even placed "on watch". S&P has been the most progressive ratings agency with regards to sovereigns and I believe the reviews from Fitch and Moody's will not weigh on the …

S&P Likely To Release Euro Credit Review After Their Markets Close Today. Buy Puts

2012-01-13T16:29:00-05:00

This morning, stocks were trading lower before the open. J.P. Morgan hit its bottom line, but revenues were soft. The stock declined on the news and the recent rally in financials leaves downside room. This is one of the strongest banks in the nation and it sets the tone for the entire sector. After an hour of trading, rumors started circulating that Standard & Poor's will release its European credit review. This is the news we've been waiting for. Rumor has it that 15 countries will be downgraded. France and Austria will be downgraded by one notch. If this comes to …

Financials Will Dominate Earnings - Comps will Be Tough. Resistance Is Holding

2012-01-12T17:28:01-05:00

In the last few weeks the market rally has been characterized by light volume overnight gaps. This is not a healthy sign. Let's review some of the issues weighing on the market. China's economy is slowing down. In 2011 they slammed on the brakes by raising interest rates and bank reserve requirements six times. Their Finance Minister painted a very weak picture for Q1 and he cited rising costs. China's CPI came in higher than expected last night and that might postpone easing. Economic conditions in Europe are also slowing down. Yesterday, Germany (the strongest/largest country) reported that Q4 GDP declined …

Bond Auctions In Spain and Italy Could Weigh On the Market Tomorrow. All Calm Before Earnings Season

2012-01-11T16:59:00-05:00

Yesterday, the market broke out to a new relative high on news that Fitch would not lower France's credit rating in 2012. They will be reviewing the entire EU and they will post the results along with S&P before the end of the month. This dark cloud has been hanging over the market and the news was bullish. Most analysts have priced in a single downgrade for France. There is also a possibility that Germany will be downgraded. Given the comments from Standard & Poor's after the European summit in November, I felt they would post their results as soon as …

Fitch Will Not Downgrade France In 2012. Market Trying To Breakout On the News. Top Or Breakout?

2012-01-10T16:56:00-05:00

Today we will find out if the market is forming a top or if it is ready to break out. There was one major development overnight that could push us through resistance at SPY 130. This morning, Fitch said that it will not downgrade France in 2012. The market had already priced in a one notch downgrade and this news came as a relief. Standard & Poor's might still downgrade France, but it is unlikely to reduce its credit rating by two notches. The credit rating review by both agencies has been a dark cloud that has been looming over the …

The Market Won’t Like AA’s Guidance - The Market Should Drift Lower This Week - Buy Puts

2012-01-09T17:35:00-05:00

Last week, the market ran up to resistance on the first trading day of the year and it stalled. An excellent round of economic releases was not enough to force a breakout. Asset Managers are cautious and they are not chasing the market higher. Today, earnings season will kick off. Alcoa will announce after the close and I am expecting poor guidance. Half of their revenues are generated overseas and they will point to weakness in China. This has been one of the busiest preannouncement periods in years. S&P 500 growth forecasts have been cut in half for Q4. Now analysts …

Good Jobs Number Does Not Spark Buying - Wildcard - S&P Could Post Euro Credit Reveiw After the Bell

2012-01-06T15:46:00-05:00

The market surged higher on Tuesday and investors started the year off on a positive note. Since then, the momentum has stalled and stocks have not been able to move higher in the midst of strong economic news. This morning, the Unemployment Report showed that 200,000 new jobs were added in December. Initially, the S&P 500 rallied on the news. Decent job growth was already priced into the market and stocks are drifting lower. Yesterday, ADP employment exceeded expectations and initial claims declined more than expected. ISM services and ISM manufacturing both came in ahead of estimates. When stocks can't rally …

Three Great Economic Releases - No Rally. Asset Managers Are Not Chasing - Some Are Selling

2012-01-05T16:43:00-05:00

The market is off to a rocky start this year. Stocks shot higher Tuesday after China posted a better-than-expected PMI. Traders digested the news and realized that it was not that encouraging. Europe's PMI had fallen for the fifth consecutive month and it came and at a dismal 46.7. Furthermore, many analysts believed that China would lower bank reserve requirements and it did not. Stocks tested the downside Wednesday and spent most of the day grinding back. This morning, a fantastic ADP employment report showed that 325,000 jobs were added to the private sector. In a separate report, initial jobless claims …

The Market Is Hitting Resistance - Asset Managers Are Not Chasing. German Bond Auction Went Poorly

2012-01-04T16:34:00-05:00

Yesterday's rally felt a bit "fluffy". China's PMI came in better than expected, but it was still weak. Their stock market has been closed and when it reopened last night, it declined 1.3%. Furthermore, Europe's PMI fell for the fifth straight month. The 26 point S&P 500 rally could not be justified by the news. Throughout the day, stocks drifted lower. Overnight, China's Finance Minister said that he sees a relatively difficult first quarter. He sees downside pressure on the economy, weakening external demand and rising costs. Many analysts expected China to lower bank reserve requirements last weekend and they did …

Huge Gap Up and No Follow Through. China’s PMI Not Great - Watch For Signs of Resistance

2012-01-03T16:06:00-05:00

Over the weekend, China released its PMI and it poked back above 50. That was better than expected, but it is far from robust. Europe's PMI declined for a fifth straight month and it came in at a dismal 46.9. The focus has been on China this morning and stocks are pushing higher on the news. This will be a very busy week for economic releases in the US. ISM manufacturing rose to 53.9 and that was slightly better than expected. On Thursday, ADP employment, ISM services and initial claims will be released. The biggest release of all will be the …

If You Thought This Was A Volatile Year - Get Ready For a Wild Ride In 2012 - Happy New Year!

2011-12-30T15:41:00-05:00

The overnight news was very light, but the action will heat up next week. The market has had a 2 point range on the S&P during the first 30 minutes of trading and it looks like we are in for a quiet day. The market is closed Monday and China/Europe will release their PMI's. HSBC released its PMI for China and it came in at 48.7. This is the second consecutive monthly decline in manufacturing. Some analysts believe that China will lower its bank reserve requirements this weekend. Next week, ISM manufacturing, ISM services, ADP employment, initial claims and the Unemployment …

Italy’s Bond Auction Dismal Even With ECB Help. Last Trading Day of the Year Has Been Weak - Buy Put

2011-12-29T16:18:00-05:00

Yesterday, stocks pulled back ahead of Italy's 10-year bond auction. Investors were concerned that the demand would be low. This morning we learned that the bid to cover was 1.2 and yields were over 7%. The dismal results were largely priced into the market and stocks opened a bit higher. As I've been mentioning, European banks will have little appetite for longer-term maturities. They fell into this trap three years ago when they borrowed money from the ECB and now they are sitting on huge losses. Yesterday, I also mentioned that the ECB would actively support Italy's bond auction. According to …

The SPY Is Below 125. Buy Puts and Add If We Close On the Lows of the Day.

2011-12-28T17:15:00-05:00

The overnight news was fairly light. Italy auctioned six-month bills and the demand was good. European banks will embrace shorter-term maturities since the default risk is low. This landscape could change tomorrow. Thursday, Italy will auction ten-year bonds. This is the first longer-term bond auction since the ECB granted unlimited three-year funds to banks. The ECB will support the auction, but I believe banks will be very passive. Interest rates will move higher and the market will get nervous. Three years ago, the ECB provided European banks with this same type of liquidity and they plowed money into sovereign debt. Those …

Italian Bond Auction Could Be the First Speed Bump. Wait For SPY To Breach 125 - Then Buy Puts

2011-12-27T15:59:00-05:00

The markets will be pretty quiet this week as many traders extend their holiday. Stocks jumped last week when we learned that European banks borrowed €498 billion from the ECB. They used the proceeds to pay down more expensive debt, fortify balance sheets and to purchase short-term sovereign debt. This temporarily soothed nerves. The ECB's balance sheet has grown to a level not seen since the peak of the financial crisis in 2008. Most analysts see this as the "bazooka" they were looking for to stabilize financial conditions. From my perspective, it simply indicates how dire the credit situation had become. …