Did you miss it?
You know, the month-long correction the markets just put in. It’s kinda hard to see, but for the latter part of October and beginning of November, we saw a time-based, rotational correction.
Now we’re hitting all time highs. The grind continues.
I would love more volatility. I prefer to sell spreads into pullbacks into stocks… we’re just having to play with the cards in front of us.
My “failed breakout” level sits at 2572, which is the low from November 16th. Anything above that and it’s trend continuation.
The only kind of bearish news I see relates to the yield curve. The 2s/10s spread is the lowest since 2009. When it flips negative it’s kind of the first “warning sign” of a recession… that news alone would be enough to spook the markets but we just haven’t seen it yet. The yield curve also affects large cap financials so that may allow us to get into some decent put spreads on names like GS and C.
Trade #1: CAT
CAT had great earnings, and has been rangebound since then. I’m looking for a “rug-pull” in this stock, where the bid disappears to the earnings gap… this will cause stop losses to get hit and enough of a pullback for institutions to buy at better prices.
Expected Price: 131.50
Sell to Open CAT Jan 125/120 Put Spread
Tier 1: Enter at 0.70, Exit at 0.20
Tier 2: Enter at 1.00, Exit at 0.50
Tier 3: Enter at 1.30, Exit at 0.80
Trade #2: MSFT
I’m expecting the same mechanic on MSFT… post earnings gap and range, but no momentum. Look for the rug pull into the low 80’s and for that dip to be bought aggressively by institutions.
Expected Price: 80.50
Sell to Open MSFT Jan 77.50/75 Put Spread
Tier 1: Enter at 0.35, Exit at 0.05
Tier 2: Enter at 0.50, Exit at 0.25
Tier 3: Enter at 0.65, Exit at 0.40