Markets continue to grind in narrow ranges as tension builds in anticipation of resolution. The action has been pretty boring and much like paint drying as the volume-less trading meanders the markets.
I actually expected more upside than the markets have experienced this week thus far. Tomorrow, though, the rally may commence in response to the Jesus Stock's (AAPL) earnings release and usual Fed excitement. The action tomorrow will be interesting and important. Typically, markets reverse direction from morning trading after the Fed comments are released in the afternoon....so we'll see.
In a bigger picture approach, tomorrow may give some reading of if the market will make one final further push higher in a blow-off top type scenario to end the current rally. The upside is somewhat limited here in the short term as a further push higher will merely take things from overbought to more overbought.
Ultimately, I expect the market to move higher but the recent rally needs to be digested via sideways action and/or a pullback to test resistance turned support. As mentioned before, a retrace down to S&P 1280 or so would be very healthy to sustain a further rally.
If the rally does indeed continue higher tomorrow, or through the end of the week, current positions in both the
Monthly & Weekly Trading Services should remain fairly comfortable; I deployed the positions with a potential continued rally in mind. All of my spreads remain nicely above the market and I feel comfortable holding them.
The only tight spot may be the QQQ Bear Call Spread in the Monthly Trading Service due to an AAPL induced tech rally. The Q's are at 11 year highs and an AAPL earnings rally may push them even higher. Tech earnings have been so-so, beyond AAPL, and guidance is being ratcheted down for the current quarter; remember, guidance has already been ratcheted down for the quarter being reported now.
The current excitement will die down as earnings releases slow and markets run out of reasons to continuing railing northward. A little heat for the Q spread tomorrow/this week should not be anything to freak out about as weeks remain in the Feb spreads and the Q's are pretty overheated.
So, let the rally run and if the Q's find more steroids to push even higher, I will simply roll adjust the spread. That is the beauty of Bear Call Spreads, you can almost always buy more time for your trading thesis to come fruition and typically get paid (via receiving additional credit) to do so, thereby enhancing your profit profile.
