Options Outlook for the Week of November 10

Friday's score board was confusing to say the least. On a day where markets are flat, one would expect that all the other variables at play be muted. Not so. On Friday markets ended up flat to small green yet the VIX was down 4%, Bonds up over 1% and the ten year rates down 2.6%. Something's a miss here. With strong bonds should come weak markets. Smart money always says that the bond market is smarter than the stock market well then today the stock market should have listened to the +1% in bonds. If true then today was a bearish day. Next week markets should have a better chance at trading based on fundamentals rather than headlines. So coming into Monday traders should repeat what's working: cautiously look to go long a few quality names like Alibaba, Apple and Chipotle. I would also put Google in the bunch BUT sentiment is negative on Google due to the dreaded 'death cross.' If markets decide to sell it then it would make a good long. One can buy calls or call spreads in Baba but make sure to give time so longer dated. Also credit put spreads may be good to finance a few of those calls for even more bullish play. Note about 'no-brainers.' Today several experts in the media used term no-brainer for the bullish case into the end of year. This should be a caution flag when so many cannot see any potential pitfalls in the near term especially when markets are at all time highs AND with no concrete new positive catalysts. Note about the cash on the side lines: You hear it often said that there is money on the side line waiting to get in and that is bullish. What about the fact that markets being at all time highs might indeed invite the money into the market BUT why assume that the money will be in long positions. Would it not make more sense for the new entrant to be more bearish than bullish given the altitude of market levels? Caution is still warranted given the reckless air that resurfaced in the past two week. over 11% rip in just days is NOT normal and not likely to be sustained.