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In this article
There are two schools of thought circulating the markets right now.
“Never get in the way of a bull market.”
So how do you play it correctly? I'll tell you.

Stock Market Rally: The “Now What?” Moment

I've heard a multitude of descriptions today surrounding the current status of the markets above the 13,000 level.

Some say we're in “Nose Bleed Territory.”

Others are calling today's flat-trading a “Post-Rally Consolidation.”

And others, forecasting a downside move, say it's simply “Time to Take a Breather.”

But of course, there are two schools of thought circulating the markets right now.

The first school of thought is summarized by the comments above. We've gone up too far -- too fast -- and it's simply time to move down. It's nothing more than an issue of gravity.

But the second school of thought is, “Never get in the way of a bull market.” After all, anyone afraid of a sell-off missed the entire move from Dow 12,100 to Dow 13,000.

Stock Market Rally: A Wall of Worry

If the markets want to rise -- and the Fed continues to grease the wheels so smoothly -- you certainly want to prosper off this environment despite the downside dangers. After all, markets can climb a wall of worry for months -- perhaps even years.

In my view, the markets are currently sitting at a “now what?” moment. In other words, now that the Dow has crossed the magical 13,000 level, now what happens? Do we rally higher? Or do we correct? (and more importantly, if we do correct, when will it happen?)

As much as I'd love to rub my crystal ball and give you answers -- there is truthfully no way to tell. But for options traders like us, we don't have to answer such difficult questions. So how do you play it correctly? I'll tell you.

When I look at our WaveStrength Options Weekly portfolio, for example, it's clear that we're positioned to make money no matter what happens -- whether we witness a continued upside rally of a bowel-shaking fall.

By maintaining a balanced attack of calls on sectors that we're bullish on (namely oil, oil service, and a slight bullish call on technology) PLUS puts on sectors that we're bearish on (namely healthcare, discount retail, and U.S. autos), we can prosper in both an upside and downside market environment.

And when you're faced with dealing with markets facing that critical “Now What?” moment, it makes the most sense to own a balanced call and put position just like this. It's the only logical way to make money at critical decision points like this.

***

Bryan Bottarelli is the head trading tactician for the WaveStrength Group, and is a contributing editor for Taipan Financial News. Coming off the floor of the Chicago Board Options Exchange (CBOE), Bryan uses WaveStrength chart forecasting to develop wining options plays for his service called WaveStrength Options Weekly. Bryan is also the lead editor of BottarelliResearch, an elite membership service that he independently publishes himself.

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Stocks Turn Mixed: Post Rally Consolidation - MarketWatch.com
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