The market continues to melt higher but mostly in post/pre-market action. For the past two trading sessions, we have seen a gap up in pre-market followed by a drop to start the day and it is looking like it wants to gap up again this morning.
That said, because of the spike we just saw at 8:25 a.m. we need to see if the market fade down from here as seem of last the direction of the last 30 minutes of premarket has determined our direction to start the session. Tuesday we traded in a tight range and with it being the final 30 minutes of the premarket sessions that seems to dictate the direction of the SPY in the first 15. We need to keep this mind along with the key support lines as we look for a bounce of those to play.
Still, I think with positive sentiment from record online sales for Christmas, the Santa Rally sends the SPY higher today if it doesn’t gap up too dramatically at the open and leave little room under our 322.35 high. So this morning I will look for a clear move up by the SPY supported by market indicators that we’ve discussed including volume and a lower TRIN reading and a move up in premarket trading. If I see this it will trigger a buy to open followed by sell to close call option move today.
However, if the SPY fades down at the open as it has for the past two sessions, I’ll be patient and look for a bounce or what has been referred to as a “Inverse head and shoulders” at a support line, specifically 321.60 or 321.20. In order for this trading plan to be in play SPY must remain trading above a support level near $321.21.
Resistance: 321.80, 322, 322.35
Support: 321, 321.21, 321.60 Today’s Trade of The Day is SPY December 31 322 Calls