Historically this is a great setup for a big move in one direction or the other. With low volatility being the case the market is not looking for such a move certainly before the end of the year, so it would likely be a surprise. Where we see buyers (1160-1200) and sellers (1260-1280) exist in size it would be very difficult to see price stay here (1220).
So, when the charts say move we have to be ready to move. The window of opportunity has been narrow but good profits can be had on both sides. To be sure, swing trades have been a disaster. Stay too long with a trade and suffer the fate of time decay.
Being in tune with the rhythm of the markets will not only create capital but will save from losing too much if you have a quick trigger. In other words, MOVE YOUR FEET.
The last two weeks of the year could bring us some surprising moves. For the year markets are down single digits. Without much in the way of earnings or news prior to the new year we are likely to see positioning for year end. Tax selling, portfolio management and hedging.
Volume levels have been low recently, institutional participation is lacking. The days are long for those who trade this time of year – many give it up and just come back later. I’ll be looking for strategic trading chances without being married to any trade over the next couple of weeks.
The shorter term ideas are more ideal through year end.
Bob Lang is the Founder of option trading newsletter Explosive Options