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My indicators are now giving neutral readings after five weeks in a row of buy signals, so caution is advised at this point. There has not been as much participation to the upside over the past week, indicating that market breadth is deteriorating somewhat and that we could start to see some profit-taking as we get into the middle of what has historically been one of the most bearish months of the year.
The “Trump Put” is still in place, as there have been further talks about getting tax-reform done by the end of the year, but I think there’s only about a 50/50 chance that we’ll see that by 2018. And if the market continues to move up and we get more and more bullishness, I think the odds of a correction will increase. Even if earnings are good, I think we will eventually get a pullback (which would ultimately be a positive for the longer-term picture).
In any kind of market decline, many retailers are particularly vulnerable, and so for today’s trade I’m recommending puts on Dicks Sporting Goods Inc (NYSE:DKS).
Buy to open the DKS Dec 23 Puts (DKS171215P00023000) at $1.00 or lower.
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