The above is the 3LRs study for the Qs (30,11,3).
Daily and monthly technicals are now positive suggesting more of the same to come. The weekly looks pretty frothy however, reflecting Tuesday jump and the lack of backtracking for the remainder of the week.
The caution is in the overbought RSI levels on the daily and the weekly, suggesting a (short term) retracement of unknown magnitude.
With earnings' reports picking up anything can happen and the corollary is that "anything" will likely happen when it is most disadvantageous to your position in the market. (obviously, I haven't bought into the bull run theory yet).
More reasons for expecting a retracement include the elevated levels of the A50, currently above the 200 DSMA and technically overbought. At the same time the A200 has decisively broken through the 50 DMSA which has provided overhead support since November. Surprisingly, the A200 is not as overbought as might be expected, so this indicator must be considered net positive.
Clearly some divergence among the technical indicators I watch (the market seldom gives up its intent easily).
For the near term I continue to manage risk by focusing on intraday pivot trades. With expiration 2 weeks out, I'll also look to sell the far OTMs (both puts and calls) just to pick up some premium decay (more on this tactic later next week).
Finally, I had a comment regarding Friday's options. For those who don't follow the comments I'll reiterate some of the points in my response as I think it helps define my market bias.
1. Never buy options in the last 2 hours of Friday. The market makers typically start to discount weekend premium decay about then and although the price of the underlying Qs may rise, it's not unusual to have the option price fall.
2. There is also about an 80% chance that the Qs price will decline in the last 1-2 hours of Friday as the commercials hedge risk by closing positions for the weekend. (Also see Thursday post on Newsom's SFO article). This typical negative momentum will further increase the risk of buying calls late Friday PM.
3. Friday's price pattern was what I call "an upside down day" in that 10:30 pst is often the low of the day (per Stock Trader's Almanac). . Friday's 10:30 was the high. With the Qs bounce off R2 and both the TICK and the NYAD going downslope, the odds for a rally into the close become very low.
4. My experience is that Friday is a time to sell options and pick up the short term premium decay over the weekend and for Monday and Tuesday. We are currently mid cycle on the Aprils (14 days to go) so decay is going to pick up next week (another reason to be a seller). Buy/writes is one approach, or depending on your level of trading approval, capital and risk tolerance, a strangle of the far OTMs can be very profitable short term (also risky, so the trade must be closely monitored).
5. Since we are in the midst of earnings and the economic climate is anything but stable, volatility can explode overnight and intraday, which is why I prefer the relative safety of day trades (for now).
And a final caveat. . . These comments reflect my own particular focus and risk bias based on about 35,000 trades and may not apply to the goals and tactics of your trading plan.