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Sell These 5 Bullish Put Spreads If the Market Does This Today - Iranian Impact Will Be Temporary

Posted by Pete Stolcers on January 3

Posted 9:30 AM ET – PRE-OPEN MARKET COMMENTS FRIDAY – The market is going to open lower on increasing tensions in Iraq after the US killed Iranian General Qassem Soleimani. Additional US troops will be committed and Iran’s supreme leader Ayatollah Ali Khamenei has vowed “severe retaliation”. I am not going to downplay the significance of the event politically, but from a market standpoint this conflict will not have a lasting impact.

Yesterday the market gapped higher and it was able to close at the high of the day and at a new all-time high. That confirms the strength of the bid. This morning we might test the low of the day from Tuesday.

The drop today would need to gain traction throughout the day and we would need to see a new low for the day after two hours of trading for sell programs to gain momentum. Bullish speculators will not be flushed out until we close below SPY $316.

ISM manufacturing will be posted 30 minutes after the open. It should be fairly good given the recent trend and manufacturing only accounts for 20% of economic activity so the impact will be minimal. The FOMC minutes will be released this afternoon and I am not expecting any surprises. The Fed said that it will remain accommodative through 2020 and that reminder could stabilize the market this afternoon.

Swing traders are long VXX. Set a target of $18. We were expecting a pullback and we did not know the source of the selling. Your downside exposure should be minimal and I have been urging you to go entirely into cash during the last week. I hope you took my advice. I posted a swing trading video last night with 5 excellent bullish put spreads. Watch all five during the day. The stocks that are down the least will be your best prospects. Watch for relative strength and follow the game plan I outlined in the video. If the market does not make a new low after two hours of trading and if it is above SPY $320, enter 2-3 of those bullish put spreads. Make sure the technical support levels for each stock are preserved.

CLICK HERE TO SEE THE 5 BULLISH PUT SPREADS

Day traders should be excited. We are going to finally get some movement and I am expecting nice action on both sides. If the market bounces and the low of the day holds for the first two hours, we will grind higher the rest of the day. If the market takes out the low of the day after two hours we will drift lower. This would be a sign that profit taking is setting in and that bullish speculators are about to get flushed out. I see the second scenario as less likely, but if it happens sell programs will kick in.

Support is at SPY $320, $319 and $317. Take profits on VXX and ease into some bullish put spreads if the low of the day holds after two hours of trading.

IT IS TOO EARLY TO AGGRESSIVELY GET LONG!
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