The Bulls are in Charge

Bulls Are In Charge

Last Thursday and Friday was a very pleasant surprise in the market. Institutions came into the market with hoards of cash that they had harvested from taking their profits from the Biotech and Health care sector ($XLV). Institutions were very anxious to deploy their cash when the market opened on Thursday, leading to a gap up in all the three major indices ($SPY,$QQQ,$DJX). Volume had been lackluster ever since option expiration Friday October 16th and the first 3 days of last week. There was a bearish tone to the market since all the major indices were meeting their resistance levels and there just wasn't any significant volume commitment from the institutions. That all changed once Mr. Draghi of European Central Bank (ECB) indicated monetary stimulus on the horizon for the euro zone. To top it off, the Peoples Bank of China (PBOC) slashed their lending rate for the sixth time to spur growth and support their declining stock market and unhappy populace.

We are in the midst of earnings season this week. There are over 40 diverse firms slated to come to the earnings confessional - some with very poor outlook and others with mediocre performance. Expectations are that earnings in the third quarter will be 5% less than the second quarter. That doesn't bode well for the market except that we are now expecting easy monetary policies from the two largest economic zones of the world. This will lead to money being invested in the stock market and we can expect the bulls to be in charge now.


My Market Sentiments

Currently we have accumulated 7 distribution days just in the last 9 sessions. This would alarm me under normal market conditions. That all changed on Thursday and Friday when the volume in the market was 70% above the average volume that we witnessed at the beginning of the week. $GOOGL,$MSFT,$AMZN and $MCD traded over 200% in volume two days in a row during earnings report and they popped up anywhere from +5% to +9%. These are very bullish signs. My bullish targets for the major indices are:

$SPY ... $214
$QQQ ...$117
$DJX ... $183

Currently these indices are trading above the 200 DMA (simple daily moving average) and the institutions use this as a line in the sand to make their bullish move. Monday morning we should be getting a confirmation of the institutional commitment if the Asian and Australian markets make a similar bullish move.


Follow My Stocks

Currently I have conservative low risk option trades on the following stocks:

$PAYX ... 52.50 Nov Call Spread (October 23 trade for 35cents debit)
$NKE ...  127/130 Nov Put Credit Spread (October 21 trade for 90 cents credit)
$PM  ...  86/88.5 Nov Put Credit Spread (October 21 trade for 70 cents credit)
$ORLY ... 270/280 Nov Call Spread (October 16 trade for $1.30 debit)

They are all in the money (ITM) right now. Feel free to follow these trades along with me and comment your thoughts on them.


Stocks on My Watch List

There were 5 growth stocks that made my watch list this week and subscribers to my service got an access to my detailed trade plans for stock purchases on these stocks. There are other stocks that I am monitoring for possible Option Trades this week and they are:

$AMZN
$MON
$PPG
$INTC
$MMM
$KO
$DAL

There are other stocks with strong fundamentals and technicals but they have earnings reports in the next two weeks. I just don't want to take the risk of earnings surprises. There are plenty of opportunities from my very strong watch list of 5 stocks and it is best to just concentrate on the "Rock Star" stocks that have come through my funnel method.

Happy Trading!

ps: A lot of my subscribers were asking me as to why they didn't get my blog delivered to their email box last Monday. I was gone to Nashville Tennessee the previous week for a  'Cancer Walk'  along with my family. I also took some time off for a mini vacation and as such I didn't publish anything on Monday. I am back on my bullish mode as of this week.