The 50 day MA held as support once again this week, but it did so on lower volume. The market has spent the last month going no where.  Often times this indicates that the market is digesting its gains before making another big move. The biggest problem I see though, is that its not really telling us which direction it wants to go.

A quiet market is a good time to try an option trade that benefits from time decay.  An Iron Condor or a Butterfly would fit the bill, but you may not get enough premium to make it worth while.

It looks like a lot of traders have already gone home for the holidays. It may be a good time to join them and take a break from trading the financial markets. That way we can all be fresh at the start of the New Year.

JD

The news on Friday was good. Unemployment had dropped from 10.2% to 10%.  The market gapped open considerably higher. And then a funny thing happened on the way to the bank: the market sold off into the close on very strong volume.

What’s that all about you might ask? Once the euphoria died down, investors realized that a few more good reports and the FED might just begin increasing interest rates. The dollar jumped, while Gold and Oil tanked. That’s not good news for stocks or bonds.

It will be interesting to see if the 50 day MA supports the market this time, or if the prospects for an L-shaped recovery hold the market down. While active traders might want to put on a bearish trade or two, longer term traders and investors should consider taking some profits on current long positions. If this is another pull back, you can always get back in. If the market decides it is time to head south for the winter, there will be plenty of time to profit on the downside.

JD