Market Bounces

The headlines this morning, "MBI had massive write-offs and FDX guided down fourth quarter estimates" are not really affecting the markets. It looks like the "Technical" move is still in play, which is a continued drop in Energy and Commodity stocks, continued caution in Retail and Financial stocks, and some continuation of nibbling in Tech stocks. However, Tech is bouncing, along with certain areas of Energy and Commodities, so the market is trying to make a little noise to the upside. This may finish as a positive day.

8:00 am MT: I time stopped AKAM calls for a 45 cent loss, or 11%. I locked and walked on the last of the CL puts for a 1.14 gain, or 41% profit. I took a little of my profits on the RIG puts, which is a 1.19 gain, or 14% so far. I took a little of my profits on the APA puts, which is a 1.35 gain, or 19% so far.

9:00 am MT: I stopped out of MON for a 22% loss, and I stopped out of MOS for an 11% loss. Right now, it looks like the same old story, Energy and Commodities are almost becoming a "safe haven" play for Fund Managers. They are having a pretty bad year, so they continue to park their money where they think that they can get some long-term return.

9:45 am MT: I locked down the last of the ADM put play for a 29% gain on the trade. I stopped out of BHI for a 20% loss, and I stopped out of CF for a 21% loss. I am in the process of scaling out of most of my positions, both bullish and bearish. The market may bounce today, and carry through for a couple of days, but I don't want to be holding too many trades. I think that we could be in for a quiet period, and then some volatility. I'm not sure I believe what is going on right now. I want to participate, but I only want to do it with a minimal amount of positions. We could go back to being a little stronger to the bullish side, so I may play some more calls today, but I am going to tread lightly.

10:15 am MT: I picked up some IBM and EMR calls. I may pick up some RIMM and Q's calls as well. I am still riding the XTO, RIG, APA, and MUR puts, all of which still look pretty good. As far as the Chemical stocks, they just never picked up any momentum, and continue to get quieter and quieter. And I just can't bring myself to play any Energy and Commodity stocks to the upside, although ECA, DRYS, TS, and ANR have some good momentum today. Maybe I might nibble at some calls in a couple of those stocks, but I haven't decided yet.

1:00 pm MT: I picked up some EXM and GS calls a little earlier. It looks more and more like the Naz and the SPX may confirm a bounce today. Financials and a few Retailers (led by WMT and COST of course), are joining the Tech party, which is a good sign. Maybe this bounce can carry through for a couple of days. I would go in a little heavier, but the Dow is lagging, and Energy and Commodities are lagging a bit. So we may not have a huge, broad-based bounce, but still, we may have a bounce worth playing for a few days.

1:30 pm MT: I nibbled in on some AXP, SPY, and ADBE calls to get a little more Tech and Financials, although I don't want a lot of Financials right now.

4:30 pm MT: The major indexes bounced today, with the Nasdaq and Big Tech leading the way. Mid-Cap Stocks were also very strong. The lagging index is the Dow, which consists of many Cyclical stocks. The SPX held 1,385, which was 3 things: a horizontal support line, the 20dma, and a Fibonacci Retracement level. Volume was below average, which doesn't matter as much for a bounce, but does lead me to believe that we will probably only have a 1-3 day bounce. WMT reports earnings tomorrow before the open, and will probably give the market a boost - if the big Retail Sales economic report tomorrow doesn't come in substantially worse than expected. Remember, though, I have been warning that WMT and COST will be the best performing Retailers in an environment of attenuating consumer spending. So it's possible that we get a modest, to even slightly worse than expected Retail Sales number, but WMT does a great job with earnings and the market continues its "Technical" Bounce. If that happens, and the CPI report comes out inflationary on Wednesday, then I will look for the current rally to be just what I think it is, a 2-3 day upswing, maybe 4 days max, and then done. In other words, I think that it's likely that this upswing is a "this week" type of upswing, not a "this week and into next week" type of upswing. So I am playing calls on it accordingly. Most of the calls I'm trading, I expect to be out of in the next couple of days.

I'm in more of a "prove it to me" mode right now with the market, both calls and puts. I'm looking for stocks that have momentum already and have confirmed a move, or are close to confirming towards the end of the trading day. Then I want to hop on board, ride it for another day, and be out of at least 1/3 - 1/2 the trade. I don't see anything to tell me to ride the swings for 4-7 days right now. So I switched out of Cherry Picking mode to Short Swing Momentum Trade mode. Maybe that will all change, but I'm comfortable with my strategy right now for the current market conditions.