Gaps Away

A huge gap at the open. I sold all my positions for a very nice gain, especially for a 2 day trade. It was actually just a few business hours. If I wasn't going on vacation, I would have scaled out a bit, but I would still be out of 3/4 of everything right now, even if I was staying in town. I will tally the results up later when I have time.

The Dow broke out of 12,750, and volume looks to be tracking above average. So this looks like it will be a true breakout for the Dow. The SPX and the Naz are sitting right in their resistance zones, so they aren't quite there yet. It may be that they follow next week, or they may need a couple days to gather themselves for the next move up. The key for the breakout, and for the markets to maintain the current bullishness, is for the Dow to hold the 12,750 area, the SPX to hold at a higher low, preferably the 1,360-1,370 area, and the Naz to hold the gap, preferably above the 2,340-2,350 area.

Here are the results from the 5 call trades I entered yesterday. I sold MEE at breakeven, DIA for a 28% gain, AIG for a 30% gain, SPY for a 40% gain, and GS for a 44% gain. I bought the calls an hour before the close yesterday, and sold them 2 minutes into the open today. So I held the calls for approximately one business hour, even though they were "technically" 2 day trades. I normally would have fought with the outs a little more and gotten better exits, but I needed to just blast them out and start prepping for my vacation.

1:50pm MT: Industrials/Machinery/Manufacturing is strong because of CAT’s earnings. Tech is strong because of GOOG’s earnings. Energy is strong because of SLB’s earnings. Financials are strongish because of C’s earnings (not as catastrophic as whispered). And Aerospace/Defense is strong because of HON’s earnings.

A lot of sectors are getting toppy on the short term upswing, however, here are some movers that may still have some room to continue swinging up: CMI (breakout), TEX (breakout), MMM (breakout), GD (breakout), and TRA (bounce). I wanted to get these out before the close. Some of them have earnings coming up soon, so double-check me. But it looks like there is enough time to get a 1-2 day play out of some of these.

7:30pm MT: We still have a lot of earnings next week. The only economic report that might move the market is Durable Orders. Anything can happen, but traders will probably be focused on earnings next week, just like they were this week. Industrials/Machinery/Manufacturing is strong right now, being led by CAT. Also in the group: CMI, ETN, TEX, SGR, FWLT, JOYG, JEC, PH, and FLR. Cyclicals like MMM look strong. Energy is through the roof right now, along with a lot of the Commodity-based stocks (see last Saturday's watchlist). So be selective, if you trade over there on Monday - Wednesday. Some Retail, like NKE and AMZN, are moving up. Some Financials and Tech are strong as well. Gold is weak, which means that it's more of a "flight to safety" play than an inflation hedge - because there is plenty of inflation out there. So Gold is probably being sold on the concept that the market is getting stronger, and there is not as much demand to "fly to safety." Who invented that term? It's never a "flighty little soft flutter over to nestle up with the soft, safe Gold stocks." It's more like a "screaming pile of burning, scorched-earth nosedive headfirst through a sea of broken glass end of the world, we're all gonna die stampede to safety." Well, anyway, the market is looking stronger, watch to see if it will carry through. If it does push higher on Monday and Tuesday, keep playing the short swing calls. If we have a nice clean breakout, then a second, even greater opportunity will be waiting on the first pullback.

9:00pm: A natural resistance area for the Dow is the 200 day moving average at 13,093. That is right in the middle of my resistance zone between the round number of 13,000 and a December 2007 short term bottom around 13,100 - 13,150. In fact, the 200 dma is lining right up with the December 18, 2007 bottom. Watch for that area. If we push ahead Monday - Wednesday then obviously you want to continue to trade your bullish calls list, but that will be a very important short-term resistance area, if we get to it. If we do reach that far, it will also mean I am solidly intermediate term bullish and waiting for the next pullback to pile on.

4:00pm MT: I write up my profitable (or unprofitable) trades for you each day. I would like to hear from you. If you had some nice trades today, real or on paper, leave me a comment. I want to see how you're doing, and if my instruction is having a positive effect. This is also an opportunity to show each other some success stories. It can be very helpful to a struggling trader to see the good trades that your peers are making. It gives new traders a sense of hope, which is an important element in perseverance.