Good Morning Traders and Investors,
It is about 1 degree outside with a high expected around 13. It is snowing lightly, which combined with the cold temperatures creates that famous Utah Powder. A few more storms like this and more terrain will be open.
Just as the temperatures are below freezing, are the equity markets showing signs of cracking? If you are a true technician, then the trend in the $SPX is still up – higher highs and higher lows since March. We have a beautiful trendline coming in that has supported the lows since March. If we violate it, then look to see if we close below it. That still wouldn’t get us post a lower low for the first time, but it may trigger enough stops to signal a change in sentiment which may drive us to post that lower low.
If that is the case, rallies can then be sold with authority, but again, this hasn’t happened yet.
On the flipside, is it a buying opportunity near this trendline? Buying dops has worked as “the trend is your friend” is the old adage AND the risk to reward is in your favor.
We have resistance in the $SPX around 1115, so obviously there has been heavy selling at that level. If you are getting fidgety going into the year end and you want to take your family vacation without worrying as much, then it is a perfect time to lighten up your long positions (who is going to complain about the gains we have had this year!!??). A few other options:
- write covered calls
- purchase married puts
This won’t protect you 1 for 1 on the way down, but it will create income in your account as the market drops. If the market goes sideways or up, you can exit these “protective” positions with proper money management/technical analysis.
As we get closer to the opening bell, it looks as the bears are in control and without economic data to drive us, it will be a technical trade today. It is very important to stick to your trading plan!
I will not post a morning commentary until Friday as the mountain awaits!
Happy Trading and Be Environmentally Cool,
Brian
Jupiter Peak Financial
