We here at Option Millionaires love options.  That's why it's part of our name!  But, as much as we love trading options, it is not always appropriate to do so.  Put another way, if you are playing dice with some friends and there are three pairs of  dice; one loaded against your favor, one loaded in your favor, and one unloaded dice, shouldn't you choose to only bet when the dice loaded in your favor are in play?

That's how the option market works.  Depending on multiple factors:  the date relative to pending news, the option strategy used, the day of the week, and the condition of the broad market, you can give yourself a powerful "edge" by trading options.  This improves your odds of being profitable.  So Diamond Members, lets chat a little bit about how we can exploit the best and avoid the worst situations for trading options.  Come on by this Thursday evening at 7:30 PM EST to join the discussion.

Click here to join the webinar!

This Sunday evening at 7:30 EST, before "The Week Ahead With UPB," Chris will be hosting a webinar for diamond members only on some key changes in the stock market since Bernanke began hinting of possible tapering in the coming months.  With the FOMC news this Wednesday, you should definitely stop by.  We will be recording this webinar and posting it in the forum, however, if you cannot come.  To register, click here!

By Christopher Diodato

To get the week started, let us take a quick look at the short term charts of the S & P 500.

This pattern, since the top in mid-September is called an Elliott Wave “flat.”  To those seasoned in technical analysis, the pattern is essentially a double top that usually breaks down and then reverses back up.

If your eyes are glazing over already, this is what you need to know.  Flats almost always occur right before a market is about to reverse.  A “complex” and sideways correction often represents accumulation in a bear trend or distribution in a bull trend.  That means now, distribution is occurring, but there is still one last rally in this market!

Now back to wave counting.  I place us near a short term bottom, especially with all of this churning.  I was attempting to pick a potential bottom target a few weeks ago.   Specifically, I was watching the 161.8% extension of the first downswing from the yearly market highs. I marked 1402 on the S & P as a target.  The target was 13,050 on the Dow Jones.  Note that both targets have already been reached.  That means that, into next week, after maybe some initial flopping or even a weak decline to 13,000, the market should continue to rally.

Here is the Dow & the S & P 500.

$DJIA

$SPX

I’m sure that by now, you noticed the blue square at the top of two of the pictures labelled “Market Top Around Here.”  What’s the specific target?  For that, make sure to come back tomorrow.  And if you have not already subscribed, make sure to do so!

Happy trading!