OptionsVest

The bearish cross of the 50 day MA under the 200 day MA for the stock market a few weeks ago was a bad omen, that turned out to be a pivot point in the opposite direction of what one would have expected. Since that time, stocks have bounced back strongly with the DJIA and the Nasdaq both moving above both their 50 day and 200 day moving averages.  The only hold out, unless you want to count international stocks, seems to be SP 500, which ended the day at its 200 day MA of 1,115. Should that break through tomorrow and hold over the next couple of days, look for that to provide needed support for the stock market over the next few months.

Last week we made a couple of suggestions on how to play the bearish trend in the market, but the market has bounced back  since then, so both of these trades are under water. While the conservative Bear Call Spread above the market can still turn into a winning trade if the 200 day MA provides some resistance to the SP 500, the more aggressive Bear Put Spread below the market is one that you should have cut your losses on when it went south as the market headed north a few days ago.

JD

The seven week bounce by the stock market off of the February lows appears to have  run out of gas. This action improves the probability that the April options we sold to roll over our Bull Call Diagonal Spreads will expire worthless. Of course we do not want the market to make a complete about face, but a test of the support levels we mentioned last week should help these strategies. While stocks appear to be taking a breather, keep your eyes open for new opportunities to implement bullish strategies once the pull back is complete.

Technology stocks in the Nasdaq lead the stock market out of the gate to start the new year off positively to more than make up for its year ending final hour fall. While stocks spent the rest of the week drifting slowly upward, it does not look like it will experience much more than a pull back to support levels as it marches forward once again.  It would not surprise me if the market returns to its normal mode of operation this year, with stocks picking up 10 to 12 percent.

Option players can take advantage of this with with some bullish spread strategies, like the bull call spread and the bull put spread.  You might want to consider options with at least 90 days to expiration.

JD

The stock market ended a strong year with a final hour tumble on low volume that will likely prove to be insignificant. You should be able to find continued success by trading bullish option strategies on pullbacks to support level. Look for the market to hold up at 1,100 on the SP 500, 10,250 on the DJIA, and 2,200 on the Nasdaq Composite.

JD

While most of us in the United States were eating turkey and watching football over the Thanksgiving holiday, there was a little credit crisis going on overseas in Dubai. While that rocked financial markets around the world for a couple of days, stocks bounced back some on Monday.

Once again bad news is not really slowing down the stock market’s bull run. Investors are still using every pullback as an opportunity to add to their long positions. Savvy traders are using options to take advantage of this situation by structuring trades that reduce their risk in case this little credit crisis turns into another big event. You might want to take this approach yourself, by considering a Bull Call Spread or a Bull Call Diagonal Spread.

JD

The stock market started the week by hitting a new 52 week high, but has been essentially running in place ever since.  This rebound off of the support levels it reached at the end of October continues a pattern of bouncing between its upper and lower Bollinger Bands for the past six months. It would not surprise me if this pattern continued for at least another couple of months.

It makes sense to take some profits on your bullish positions going into the November expiration and the Thanksgiving holiday. In fact, you might even consider taking next week off and giving thanks for a much better year for the stock market than anyone would have imagined a year ago.  With the market in position to drift back down towards its lower Bollinger Band, you are likely to be in a better position to continue with some bullish trades when you get back to trading on the first of December.

JD