Market Rolls Over After Early Stalemate

We have a fairly neutral open this morning. BG gapped a little out of the gate and ran to the 105 area and the 50 day moving average. I sold the rest of the position on the pop up. I made a little over 14% return for two days on the trade, which just about offsets the loss on the DIA and the SPY from yesterday, and leaves me in position to continue to make money on the puts if we roll down.

I may be way off here, but it smells like we've lost some of our momentum on the markets. The strength was fairly narrow anyway, with Commodity and Energy stocks leading the way for awhile, and the modest strength yesterday mostly coming from Coal, Metals/Mining, and Steel. The dilemma for the markets is Earnings Season. The dilemma for me is that I don't like to be short the market (in a lot of puts) on the weekend or Monday morning ahead of the first big week of earnings. I rarely make that work. So, if we don't get a rollover in the next day or so, I will liquidate everything and go Flat for the weekend. Perhaps if I see some kind of really high probability buy signal (preferably bullish) ahead of Earnings Season, I may take it, but I'm planning on being fairly flat (out of everything) the market for the weekend.

I sold the ABX puts for a small profit of $150. I don't like how frisky Gold is acting right now - is it going to act as a flight to safety if the market rolls over? The market is breaking down near the short term support and traders are running to Gold a bit. I also don't like that DBA is going up while the market is going down. I'm keeping the GDX and the AEM Gold puts for now, just in case this is nothing, but they are getting very close to my intolerance zone.

I dumped AEM and GDX, right or wrong the signals were for a downswing and we popped beyond 1% above yesterday's high. I lost about $1,100 after the dust settled on the 3 Gold puts.

I stopped out of my DBA puts for a 51 cent loss. I picked up some JCP puts, and nibbled a little on DIA and SPY puts after the break of the short term support. The IGT puts I'm in are looking good. I may pick up some MGM puts if it will rally back into the 56 area intra-day. I don't want to hold the SPY and DIA puts beyond Thursday afternoon unless they are making me money. Oil has spike over $112 per barrel, which is bullish for Energy stocks and bearish for a lot of other stocks and sectors, and even to some extent the economy.

The Nasdaq followed through with its rollover and made it down near short term support levels. The SPX also followed through and rolled down. The SPX has short term support in the 1350-60 area and also down in the 1340 area. The Dow is fighting to hold up and not confirm a rollover. If we drop another point on the DIA and the SPY, I will lock down those put trades and walk. I am still planning on being fairly flat the market going into the weekend.

BA broke out to the upside today with volume. Gold wiped out its confirmed rollover with a bounce back to resistance. The Energy sector was, by far, the biggest performer on the day. However, once again bullishness in the market was fairly narrow and concentrated, and a lot of Energy stocks finished off the highs with Shooting Stars (DVN, PXD, CAM, SII, APC, PDE, and FTI). And a couple Energy stocks broke down (VLO and FTO, and MRO rolled over), which is interesting when coupled with the fact that Oil hit another record today above $112. Energy, Metals/Mining, and Steel continue to be the strongest sectors, but they are getting pretty toppy on the short-term. I am looking to play calls on these sectors, but not before a several-days long pullback.

Brokers rolled over pretty good today, with LM and LEH leading the way down. Financials were weak, but many Financial stocks are still holding at higher lows. MGM broke support on heavy volume. UPS put the whammy on transports and made FDX a risky play now. JCP confirmed a rollover and Retail was weak. DE had a Bearish Engulfing right around resistance in a sideways trend.

If the markets do continue down tomorrow and we go -100 to -150 on the Dow, I will be locking and walking on most of my puts. We are too close to Earnings Season, and the market is almost "desperately bullish" after last quarter. Anything can happen, but I'm not playing for a big downside move yet, we are still too Neutral and Choppy. I'm not sure that we can get a big upside move either, unless corporate earnings start beating expectations pretty good next week.

So as always, we shall see what tomorrow brings.....