Midweek Options Update 12/16/20

Last updated on December 21st, 2020

Coming into this week we had markets right back up near all time highs as we head into the end of the year. We had a window this week before the holidays for 2 way price action on decent volume.

The catalysts were there to provide the two way movement with the Fed statement on interest rates which came out yesterday afternoon and the ongoing stimulus negotiations. However, here we are going into the end of the week and markets continue their one way trek higher.

We didn’t get any surprises out of the Fed Wednesday afternoon as they continued to voice their view that they will do anything necessary to prop markets up. SPY loved the news and made a new all time high at 371.16.

The next big area of resistance that we are tracking on the upside will be at the 372.00 level. On the downside the 8 EMA on the daily chart has moved higher to 367.71. That is the first area that needs to break if we are going to get anything going on the downside.

SPY Volume

Volume on SPY continues to struggle to hit 50 million shares on a daily basis. We also continue to see the daily ranges contract with the ATR now at 4.28. The internals have also been mediocre at best with the breadth being weak on the latest move to the upside.

All this to say we continue to see signs of a tired and extended market but price just refuses to pullback.

As we head into the holiday stretch over the next few weeks we will most likely see volumes contract even further.

  • We do plan on trading right through the end of the year but will make some adjustments along the way.
  • We will plan on reducing our position sizes by 25-50%.
  • We will also lean more to the credit spreads in order to get the time decay working in our favor in case we do get the low volume chop to kick in.

In this week’s Midweek Options Update video we take a look at where we stand from a technical perspective on the key markets that drive price action. We also take a look at a few new trades that are setting up for us going into the end of the week.

Take a look and let us know if you have any questions that we can help with. We will be back on Friday afternoon for our weekly recap. Mike@netpicks.com.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

* :

* :

* :

:

This site uses Akismet to reduce spam. Learn how your comment data is processed.