I think it’s reasonable to plan for a pullback.
Yes, we’re breaking to new all time highs. That’s not bearish, never will be.
But it’s been a while. It’s OK for the market to exhale, maybe retest some of the levels created over the past few weeks. And maybe we’ll see some rotation out of the hot money stocks which will give us buyable entries.
The huge level to watch is 3023. That’s the breakout level and the first successful retest that we saw from Oct 31. If the market manages to selloff under that and hold under it, then we’ve got a failed breakout… but I think that’s unlikely. Instead, pullbacks will be shallow or potentially a sideways drift. The buying pressure into the end of the year is just too strong.
Trade #1: TLT
Out of the 75 other reasons the market is breaking out, the bond selloff is helping. Investors are bailing on treasuries and buying stocks. TLT is now 4% under its 50 day moving average, which is a pretty good stretch under, given the fact that the long term trend is up.
Expected Price: 134.88
Sell to Open TLT Jan 129/126 Put Spread
Tier 1: Enter at 0.41, Exit at 0.11
Tier 2: Enter at 0.61, Exit at 0.21
Tier 3: Enter at 0.81, Exit at 0.31
Trade #2: GOOGL
Looking for a retest of the rising 20 day moving average and the October gap fill.
Expected Price: 1276.11
Sell to Open GOOGL Jan 1140/1130 Put Spread
Tier 1: Enter at 0.80, Exit at 0.30
Tier 2: Enter at 1.10, Exit at 0.40
Tier 3: Enter at 1.40, Exit at 0.50
Trade #3: MS
I want to see a full gap fill from the move higher 2 weeks ago.
Expected Price: 47.33
Sell to Open MS Jan 44/41 Put Spread
Tier 1: Enter at 0.42, Exit at 0.12
Tier 2: Enter at 0.62, Exit at 0.22
Tier 3: Enter at 0.82, Exit at 0.32