Faltering Thursday – Last Chance to Make Strong Bounces
by phil - October 23rd, 2014 7:56 am
We decided to give yesterday a pass.
Though the indexes failed to hold our strong bounce lines (well, 3 of 5 did), we can blame Canada for that one as a gunman shot up Parliament yesterday afternoon and the "terrorist attack" news sent our markets lower. Other than that (and these things are unavoidable when you sell 500M guns to 400M people in North America), it wasn't a bad day for the markets, so we're going to wait and see what actually sticks. Our watch levels remain:
- Dow 16,466 (weak) and 16,632 (strong).
- S&P 1,878 (weak) and 1,903 (strong).
- Nasdaq 4,280 (weak) and 4,360 (strong).
- NYSE 10,360 (weak) and 10,540 (strong).
- Russell 1,104 (weak) and 1,128 (strong).
So the Dow fell almost exactly from it's strong bounce to it's weak bounce yesterday. Aside from confirming the 5% Rule™ is firmly in charge, holding the weak bounce line is bullish – IF it holds. The S&P and Nasdaq held their strong bounce lines (thanks to AAPL) while the NYSE stayed in it's range but the Russell was a big disappointment and failed the weak bounce – a very bad sign if they can't take it back today.
We had a lot of fun playing the Russell Futures yesterday, starting with my too-early short…
Thrilling Thursday – Can Super Mario Save the Markets?
by phil - October 2nd, 2014 8:14 am
Wheeeeeee - What a ride!
As with skiing, a nice drop can be lots of fun – if you are ready for it. If not, things can get broken… Supports were broken yesterday as we lost the 200-Day Moving Average on the NYSE (10,600) and the 50 dma on the Dow (16,930), Nasdaq (4,500) and the S&P (1,975).
We lost the Russell ages ago, when we made our Death Cross so "told you so" on that one. As I said at the time (9/16):
Of course, we've been telling you for weeks now that the markets were toppy but at least now it's getting obvious. The Fed may still pull a rabbit out of its ass and goose the markets once again but I very much doubt anything is going to stop the eventual correction now. Delay, maybe – stop, no.
Our trade idea that day in our morning post that day was:
If, however, you buy just $2,500 worth of the of the TZA Oct $13/16 bull call spread at $1 (25 contracts), they will pay you back $7,500 if TZA goes up about 15% (just a 5% move up in the RUT) AND they don't lose all their money until TZA is down 10% (a 3% move up in the RUT).
That trade is already 110% in the money and on it's way for a $5,000 per unit gain (200%) – a very nice way to hedge what is, so far, less than a 10% pullback in our indexes. What we do, once these hedges go in the money (if we're still bearish) is add another layer of hedges at higher strikes and we put a stop on our original hedges to lock in those gains. That's where we are now as we begain playing for a bounce yesterday in our Live Member Chat Room (you can join us HERE).
This morning, we're waiting on Draghi to wave his magic stimulus wand and stop the market slide but I'm not sure he can…