As my loyal readers already know, almost every indicator I follow, both technical and sentiment, is bearish.
But, something today made me particularly happy.
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Trade with a Margin of Error (by Andy Crowder)
Okay, I think we all know my bias at this point. For those who don’t, it’s bearish.
I am not going to bother going into why I am bearish. Just read my posts from the last few weeks to truly understand why I am currently bearish.
So, I want to talk about something more important today – strategy. More specifically options strategies.
With options, you can control with precision, the amount of risk and type of risk you wish to take in any given trade in any situation.
One of my favorite strategies is selling vertical call/put spreads like in the Theta Driver Options Strategy.
Let me explain. And please understand I am keeping it simple for conceptual reasons. Once, you understand the basics we can really dig deep to understand how to apply risk-management.
The Grind Higher Continues….For Now
As you all know I have had a bearish tone since mid-January.
The market had moved into a short-term overbought state, excessive optimism had pushed into the market and seasonality had entered a historically bearish.
And over the past several weeks all of the aforementioned have pushed further and further into a bearish state.
But, the bulls have yet to waver and the grind continues. Since December 19th the S&P 500 (SPY) has climbed over 12% without pause.
Interesting Probabilities Surrounding Payrolls
Will the beginning of the “anticipated” correction come tomorrow?
The Nonfarm Payroll report is often a market mover and I expect to see much of the same tomorrow.
The market is wound tight and typically when that occurs we are witness to a large directional move.
I expect, regardless of how positive (or negative) the report is tomorrow, the market will push lower.
How Long Can We Teeter on the Edge?
January’s rally was admirable.
Its perseverance frustrated bears.
The infrequent single day declines maxed out at -0.6%.
