Sunday, November 5th, 2017

Market jumps on jobs number

A better than expected job report and the market opened higher on a gap. After declining 5 days on little or no pullback, the market snapped back and held the gap during the entire trading session. The bullish action continues as it has been since October 9, 2013. Most of the indexes are in the upper channels and there has been no sell off or pullback lately. The high level consolidation is seen based on a stronger economy and a strong corporate earnings season.

Market is also expecting QE3 to continue at least into the next year 2014 and the Feds meeting this month later will perhaps confirm that. There has been lot of rumors of tapering off and easing but nothing solid has come out. The bears are growling and most of this talk come from the bears corner and is shrugged off at every downtick. Buyer just keep stepping in giddy on Feds action month after month. Janel Yellen hearings have added fuel to fire. Traders love that kind of dovish talks and expect the Fed induced coma to continue throughout 2014. There are so many euphoric feelings its impossible to pare down the reality.

To say the least this market is very overbought and has stayed that way for last two months. Both the stochastic and MACD indicators are showing it. NDX is the strongest one among all indexes and partly due to AAPL, GOOG, NFLX and PCLN price actions. GOOG has shown remarkable bullish action since the earnings gap and has now formed a table from which it can launch further to the upside to the the 1100 mark.

This week expect the same type of action. There may be a small pullback or shallow retracement, but the action may continue to the upside as per the charts. Because this is the month of December you have a greater chance of another Santa Clause rally and the bullish stance can continue towards the end of 2013. Trading at high levels and into nose bleed territories is risky at best. Going long buying calls and stock is always beset with risk when the market is making new highs. Therefore we are using ratio spreads to miminize risk and unbalanced strangles to earn time decay.

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