Big Momentum Day

Gold is Down and the Market is Up

I'm selling most of the rest of the AEM, ABX, GG, and FCX right now. Big, big profits on those puts. I dumped the last of my Energy puts at breakeven. I'll dump the last of every put here soon. I'm also looking at going calls on my bullish list and the market ETF's. I'm waiting on the ISM, which comes out in 15m at 10am ET before I do. I will clean this post up as the day goes along, but I wanted to get the info out right away as I was paper trading.

I was checking some of the bullish stocks and a couple of them have bang banged too hard, I'm looking more at the market ETF's right now, maybe PRU, AIG and some others. I will go through my list after the ISM announces in 5 minutes.

Looks like the ISM just checked in at 48.6, which puts it a little more towards the end of the spectrum that could keep our short term bounce alive. I'm going fishing for calls right now, but I won't open the barn doors on this and I will only chase these gaps this morning a little, I want some pullbacks too. Watch for a bull flag on the 15m on the Dow. I want this to show me that it's going to hold and not just be short covering.

I'm out of almost all my puts, but I kept a little of ABX, AEM, and GG, about 15% of those puts just in case they make lower lows.

Watch this now, I think we're going to get an Advance Block on the 15m charts on the Dow right now. So this is the pullback I'm looking for. I want to see how this holds up.

We didn't get the Advance Block so I nibbled on PRU and AIG. I'm also looking at AXP and COF in Financials, some of the REIT's like PSA, EQR, GGP, and others, and index ETF's, especially the DIA, SPY, and Q's, not so much the IWM. But I'm waiting for a pullback on the 15m charts before I add. This is all I have time for now, the phones are picking up around here (which is pretty predictable with a market bounce).

Throw the REIT's out, you can't get good spreads on any of them, the only one that is even close is EQR. So far today I have nibbled (half-positions) on PRU, AIG, AXP (in a 15m Flag right now), and COF (in a 15m Flag right now). I don't want any Retail, too much risk there still, although NKE, SHLD, and AMZN are looking pretty good. GILD moved too far. I'm floating a couple of nibblers on the DIA and SPY in case they pull back. I may do the same on the Q's. This last little thrust on the 15m charts on the Dow smells like it's ripe for a double move, I'm not buying into it. If it does pull back to 124.50 - 125.00 I will start my nibbling there.

I'm still waiting on the DIA and SPY calls, if I get in the 125.75 area or better on the DIA, and the 135.50 area on the SPY then I'll get a half-sized position. I have full-sized call positions now on AIG, PRU, COF, and AXP.

I never did get the DIA and SPY calls but I have four other nice positions. If we wiggle a little out of the gate tomorrow morning I'll hit those for full sized positions and look for 12,750 on the Dow by the end of the day. Today was a Flash day (my term), and tomorrow may be the Bang day (again my term) that finishes it off to 12,750 (which is horizontal and channel resistance). Flash Bang, think of lightning followed by thunder. Lightning is shocking, powerful, and flashes in an instant. Thunder follows up with a rumble and more power, but not quite the same sharp power or energy. Flash Bang. So today was the Flash, tomorrow may be the Bang to 12,750. One of the hardest things to do as a trader is discern when you have a Swing Day and when you have a Momentum Day (or Flash Day). Swings are when you buy pullbacks, Momentums are where you chase it, you buy high to sell higher. Linda Raschke and many other veteran traders will tell you that being able to switch gears between swing buying and momentum buying can be the difference between making money and getting hammered. Many pit traders swing all month and then short into a momentum day only to give it all back because the market never comes back. That's why I started chasing in the middle of the day, I smelled momentum.

As far as the catalyst, I don't want to spend a lot of time writing this up, but here's a quick description. First, we were at a critical tipping point - at support - which I pointed out yesterday. We got more write-downs out of UBS, and we had LEH scrambling to raise money to take care of their own write-downs. The market shook it off, and even took a glass is half full approach to the Financials instead of the glass is half empty. In addition, this is the first day of the month and the new quarter, which meant some Mutual Funds may have been wanting to put new money to work. Nothing like the January effect, but a catalyst nevertheless. As soon as I saw the market clearing yesterday's high, I knew it could be confirming the bounce. Then the ISM hit and off it went for the rest of the day. Professional traders wanted to take things a certain way today, and when it looked like the Financial Sector and the ISM wouldn't kill the bounce they were manufacturing, then it was clear skies for the rest of the way. You can see this forming up for a Bang tomorrow - right to resistance. Then we may get a Doji day on Thursday as traders put their hands in their pockets and wait on the big Grandaddy economic report coming Friday - the Employment Report. So, if the Jobs Report strongly beats expectations then the market will probably break resistance. If the Jobs Report strongly misses expectations then the market will probably fall back to the lower end of the channel. I will put up a chart of the Dow later so you can see what I'm talking about.

Here is the Daily chart on the Dow, with the resistance lines and price target:
(click on image to enlarge)

If we get wiggle out of the gate tomorrow, I may add some more calls for the Bang (if we get it), we shall see.....