ARE WE GOING LOWER?

Today was a strange day. After the buyers erased a 130 point drop yesterday, you would think that the market could stage at least a small rally today. Instead, the Dow dropped a bit and the volume increased. With the buyers unable to push the market higher today, you have to look at the possibility that a market correction could be imminent. A few weeks ago, I mentioned a pattern that was showing up near the end of earnings season. For the last few quarters, the market has rallied up during the main reporting period. Once that main reporting period was over, the market has gone into some pretty decent corrections. I don't know if that will happen this time around...and if it does, it will be impossible to predict exactly when it would occur. However, when you combine the current winding down of the earnings season with the price action today in the market, you could make the argument that a drop could be imminent. Throw in the end of the month as an additional factor.

The only trade recommendation that I have today is a calendar spread on AMZN. This one could be tricky since I don't know exactly how far it will gap down tomorrow morning. I'll likely wait for the first hour to finish before making the trade. I'll look to do the February/March calendar put spread about $5 out-of-the-money. Make sure to check the reward to risk. I might not end up doing it if the numbers don't look good tomorrow morning. I think that AMZN will continue to move down to about $167 in the upcoming days. Don't do this trade unless you have taken the Course 2 classes on Option Spreads. You do need to understand the trade set up and the risks involved.