Market Fades Away

Nothing huge on the Economic Front pre-market. CSCO is giving Tech a little boost, but Energy and Commodity stocks rotating out a bit this morning is probably doing more to prop up Tech.

7:40 am MT: I sold the last of SII at the open, and I just finished scaling out of the last of NYX at the 75.70 area. I am getting ready to start selling some AGU into this bump up, and I will be done with SLB soon, ahead of the Oil Inventory Report.

7:50 am MT: This is a warning that Energy stocks may be done short term. I am all out of SII and SLB, and I also think Chemicals may be done, so I'm locked on AGU as well. This might be the end of Energy and Commodity stocks short-term, at least until the Oil Inventory Report later today.

7:55 am MT: Tech is on the move, this is probably a rotation from Energy and Commodity stocks short-term to Tech, and maybe Financials. IBM is on the move.

8:00 am MT: I picked up the rest of my AKAM call position. I am also nibbling into ADSK right now.

8:20 am MT: I picked up puts on CL, MDR, MOS (nibble), (I have a MOS put nibble from yesterday), NOV (nibble), and MUR (nibble). If the Oil Inventory Report doesn't do it for Energy stocks and the puts look good technically, I will get more.

8:35 am MT: Here is the final tally on the last four call trades that I closed today: SLB was a 20% gain for 2 days, SII was a 33% gain for 2 days, AGU was an 11.4% gain from yesterday, and NYX was a 52% gain from yesterday.

Also: IBM is on the move, so I will look to lock down about 1/4 of the trade here at 125 and another 1/4 of the trade in the 126 area if it hits that later today. I just locked down some of the IBM calls for a 29% gain so far (5 days).

9:00 am MT: The Oil Inventory Report came in much higher than expected, which may be bearish short-term for Energy stocks (and Commodity stocks). It will be interesting to see how the day finishes out in those areas.

1:30 pm MT: With Chemicals breaking down a little, I added to the MON and MOS puts and I picked up CF puts. I have full positions on 3 Energy puts and 3 Chemical puts, along with puts on CL and MDR, which look great right now. I'm in the money on most of the stuff already, except NOV.

4:30 pm MT: Market Wrap: The major indexes faded away throughout the day. The Momentum Pullback bounce from yesterday is gone. The Dow climbed back down the Hammer from yesterday and then some. The Naz and SPX fared the same. Every index looks headed for the 20-Day Moving Average. Now watch that area because the 20dma and key horizontal support on the Dow both line up right at 12,750. The Naz has horizontal support in the 2,400 area, and guess where the 20dma is lining up on that index? And the SPX has horizontal support in the 1,375 area, and lookie lookie, there's that 20dma again. So this is lining up for a KEY TECHNICAL BATTLE tomorrow. Can the indexes hold those areas?

The answer is going to come from Sector Rotation. If traders rotate out of Energy and Commodity stocks, they must rotate into Tech, Retail, and Financials, and not completely out of the Stock Market, or the major indexes will most likely lose the battle of the Key Technical Area to the Bears. We're really lining up for a key battle in the next day or two. Here we go, this is the first real test of our new, Intermediate Term Bullish posture on the market. If the market fails at this then we go back to Neutral. If the market holds and bounces with authority, then we strengthen the Intermediate Term Bullish posture. If the market futzes around, and kind of bounces, then we will go tight and more tepid, with smaller swings.

The best case scenario, for the entire summer, is for Energy and Commodity stocks to rotate out for several weeks or longer, and Tech, Financials, and Retail to rotate in. This would be an indication of lowerering inflation with at least some economic stability. If the entire Stock Market rotates out, then at least we should have some solid put plays for several weeks. But it would mean tougher economic conditions for awhile. If we futz around, it will get tighter, like it was prior to last week.

Remember a couple of weeks ago when I said the market was at a key point that would probably set the tone for several weeks?

http://dwightanderson.blogspot.com/2008_04_01_archive.html

And I said I was going to strategize accordingly. Then the market tipped bullish and I switched to pretty much 100% call-trading, and really made some (paper trade) money, even when I was gone for 1 of the 2 weeks on vacation. I gave the warning, and indeed it was a key tipping point that set the tone for 2 weeks. Well, we are at a key tipping point again, so watch things closely the next two days, just like before.

I am positioned with about 3/4 of my trades in puts (mostly Energy and Commodities), and 1/4 of my trades in calls (Tech and Retail). I changed from 100% call-trading mode in a blink - because the lower highs and consolidation I thought might happen in most Energy and Commodities stocks, may be happening. As always, we shall see.....