Benny Was Barry

7:20 am MT: GDP and some preliminary employment data reported numbers that showed growth to be slightly better than expected, inflation to be slightly lower than expected, and job growth to be slightly better than expected. The market reacted positively.

HES and NOV both beat earnings, which will probably help out SLB. HES is interesting to me because it is holding up relatively well, just like SLB, and it's probably going to pop on its earnings this morning.

Remember, this is the Fed day, so there is no reason to get too loaded up with your trading. The Fed Funds Futures are predicting an 80% probability of a 25bp cut (down to 2.00%). With the announcement only a few hours away, the FFF have close to 100% reliability. The Fed is also expected to signal (or hint, wink-wink, Fed-speak, etc.) that the rate cutting cycle is on hold for after today. Now we just have to wait and see which Fed Governor shows up, Axl Rose or Barry Manilow.....

7:55 am MT: I picked up a half-position on HES. The options were crazy out of the gate, but they settled to 20 - 30 cent spreads a few minutes ago on the little pullback on the 5m charts. I also picked up a little RIMM again this morning. I sold 2 contracts (out of 10) yesterday at +1.50 right at the high. I bought those 2 contracts back cheaper, this morning. I may add a little more if it holds up. I am planning on selling some of this stuff ahead of the Fed.

5:30 pm MT: Benny was Barry. It's nice to see him Manilow out.....I mean mellow out. Two Fed Governors dissented again. I really think the Fed is a little disjointed right now. Several Fed Governors are obviously (and probably correctly) worried about commodity and energy inflation. Everything I thought would happen did happen. The Fed cut 25bp, they signaled the end of the rate cut cycle for now, and the market dropped. What I am still not sure of is whether or not we bounce from here. The Dow has four Shooting Star-like candlesticks after a short term upswing since January 30th. Today makes five. On the previous four, twice the Shooting Star led to a short term downswing, and twice the market shook it off and took another leg up. The two reversals were on March 12 and April 7. The two continuations were on January 30, and to a lesser degree, February 19. This is the type of environment we are in. I would usually give Shooting Stars at a short term peak more like a 70% - 80% probability of reversal. So it's a toss of the coin. And it's especially a toss of the coin with our current environment + the ISM tomorrow and the Jobs Report on Friday. If we get good numbers on both, then the Shooting Star will probably NOT reverse. If we get bad numbers, then we probably go down.

So look here, this continues to be a nutty market. We have had a real Chop and Slop market since January. It can be very tough trading. I like to keep a positive outlook on everything, but I also like to be realistic and honest to myself and to others.

This is what I think, and this is why I'm not even talking about trades today, and focusing on strategizing for the next few weeks, and perhaps beyond. The market has technically gone Intermediate Term Bullish. However, I have seen 2 sets of failed bounces this week across multiple industries and on 2 separate, and separated days. That's NOT what you want to see from an Intermediate Term Bullish market. It's too squishy, traders are too twitchy. We don't have strong, decisive hands stepping in with big money to push the market up the mountain with momentum and conviction. The next two days, to me, will set the tone for how things go for the next several weeks, and maybe beyond. If we get a poor ISM report and a poor Jobs report, and the market rolls over (especially a decisive drop below the low of the last two days), then we are probably going to stay in a choppier environment for awhile. That means my strategy is going to be threefold: playing Momentum Bounces on Short Swings (1-3 days), playing Day Swings (60m chart swings), and Cherry Picking High Probability Momentum Pullbacks (Short Flags). I have been playing Short Swings, but I went away from Day Swings, and I have been Cherry Picking Standard Flags (SLB, CAT, PH etc.).

If the market shakes off the Shooting Star today, and the ISM and Jobs Report come in stronger than expected (probably the shake-off would be related to the good economic reports), then I will keep playing Short Swings, and Cherry Picking Standard Flags. I may even play a few Standard Swings (3-7 days) if the market goes full-blown Intermediate Term Bullish (which it probably would if it shakes off the Shooting Star today).

Now you can see why I focused tonight's post on Strategizing for the near-term, and possibly the next several months. Because we are at a critical point tomorrow and Friday. We either shake it off and power ahead into Intermediate Term Bullishness, or we collapse back into more choppiness and tentativeness. We may not collapse back to full-blown Intermediate Term Neutral, but flopping back down tomorrow and Friday means the market is not ready yet. And therefore you have to ask yourself, when will it be ready? What catalyst is on the short-term horizon to put the rocket launch on the market? Earnings Season is winding down. The biggest Economic Reports will be in the books. The Fed has done their thing. The only thing I can see that could move things is some kind of data over the next several weeks that shows that the interest rate cuts that started last September are boosting the economy. It doesn't look like housing will turn around in a blink, and no-one really expects it to. Housing may be at a bottom, but that industry takes a little while to turn around, it's not a motorcycle, it's more like a truck. Energy and Commodity prices are at all-time highs, so there's no relief there. The bottom line is this. The economy is probably doing better than a lot of analysts think it's doing. But traders may not be willing to really power up the market until they see some signs that we are not going to just crunch along for awhile, but that the economy is really ramping up, getting closer to hotter expansion.

So the next couple of days will probably set the tone for the next couple of weeks, and perhaps beyond. And I will have my strategies in place to handle whatever the market decides to do. Every little while it's a good idea to assess the current conditions based on the charts and the big picture, and then play your appropriate strategy set. Either Bullish/Bearish Trending, Neutral Trending, or Choppy strategy sets. We are at another tipping point, the next two days will probably dictate which of the three I choose for the next several weeks, and perhaps beyond.