Market Trend

We currently have a buy signal on the weekly charts from 895.75 on the Jan. S&P contracts. The markets are currently at 869, but momentum is gathering and the stochastics are up.


Commercial Traders

Not much has changed with the commercials this week. They continue to be net sellers so keeping our bias toward the downside until this changes is the thing to do.

Seasonal Tendencies

Monday-Wednesday have been seasonally bullish with the S&P up over 60% of the time on each of these days. Thursday is traditionally bearish with the S&P down almost 70% of the time.

Forecast

The markets are slightly skewed toward the bullish side of things for a few reasons-

1. We are at the beginning of the Santa Claus rally.

2. We have a buy signal on the weekly charts from December 8th.

3. The equity put to call ratios are bullish.

However we need to get a close above 878, which is the 20 day moving average to confirm this trend. If this happens it is likely that the market will make a run toward the 920 area on the S&P. Again we don't want to be buyers in the current market, but want to wait until things get overbought to be sellers.

Trades to Take

Our suggestion would be just to relax for the next week and let the rest of the year unwind. We do anticipate some big moves coming into the new year and don't believe that the market is finished falling yet. However we would like to wait for the indexes to become a bit oversold before we begin entering short positions.




Happy Trading and Happy New Year,

OptionSpreadTrades.com

The market will most likely continue falling & get worse before it gets better.