Two weeks ago everyone was panicking about this being the end of the bull market.
Well... here we are again. The S&P covered 200 points in about 2 weeks. This was led by a short term release valve with the debt ceiling, and a cooloff from the nasty news flow we had been seeing out of China.
Then you have the fact that the VIX got absolutely CRUSHED, headed down to 15 while the VIX futures market is being stubborn and sticking in the 18 - 20 range.
That last part is important. Yes, there are risks coming into the end of the year with fiscal cliff, Fed voodoo, people getting sick (can't use certain keywords here, but you know what I'm talking about), and China.
Much of that risk is priced into hedging instruments already, and it's going to take a lot more headline risk for us to get another rollover like we have had recently.
There is one thing... earnings. Mega cap reports earnings this week, and that may have a profound impact on the S&P by a weighting issue. In the near term, that's the only thing that could drag the market down just from the simple math behind it.
Today, we've got one normal trending setup, then we're going to dumpster dive a bit.
Trade #1: UNP
After holding support at 190, UNP had a straight shot higher and a break to new highs. It's extended here, and we can start looking for a nice pullback. I want to see a test of the prior resistance level.
Trade Setup
Expected Price: 227.25
Sell to Open UNP 17Dec21 215/210 Put Spread
Tier 1: Enter at 1.04, Exit at 0.36
Tier 2: Enter at 1.456, Exit at 0.74
Tier 3: Enter at 1.872, Exit at 0.99
Stop Out If Close Under 214.89
Trade #2: SNAP
I've already got some put spreads sold and I think I'm a bit early. Instead we want to start playing this as the stock approaches the massive support level just under $50.
Trade Setup
Expected Price: 51.21
Sell to Open SNAP 17Dec21 45/40 Put Spread
Tier 1: Enter at 0.95, Exit at 0.26
Tier 2: Enter at 1.33, Exit at 0.59
Tier 3: Enter at 1.71, Exit at 0.78
Stop Out If Close Under 44.89
Trade #3: BIIB
Biogen has done a full round trop from their spike higher. It's now at the lower end of the support area from the first half of this year, and is a good risk/reward setup to work from.
Trade Setup
Expected Price: 269.53
Sell to Open BIIB 17Dec21 250/245 Put Spread
Tier 1: Enter at 0.95, Exit at 0.26
Tier 2: Enter at 1.33, Exit at 0.59
Tier 3: Enter at 1.71, Exit at 0.78
Stop Out If Close Under 249.89