Market Pops and Drops and the Dow Confirms a Rollover

Futures are up on GS earnings, which beat expectations. Traders are focusing on GS despite worse than expected Housing Starts and Producer Inflation. This is playing out just as I expected, and as I posted for the past several days. What this means is that short-covering in Financials should continue this morning, at least for a little while. I will look to sell RIMM on any gap up at the open, especially if it goes to about the 143 area.

7:35 am MT: I sold the calls on RIMM, HK, FWLT, WDC, and stopped out of IBM and ECA. Here are the final numbers: RIMM was a 1.09 profit or 11% gain, HK was a .65 cent profit or 17.5% gain, FWLT was breakeven, WDC was a .65 cent profit or 15% gain, IBM was a .20 cent loss, and ECA was a .20 cent loss.

7:50 am MT: I have started the process of nibbling on puts. I picked up partial put positions on DIA, SPY, QQQQ, JPM, and KLAC.

8:05 am MT: The market gapped up this morning and then traders immediately faded stocks. I think that traders may try to keep pushing things up a little, but watch this, because we might finish the day in the red. The indexes are potentially forming Bear Flags, which could roll over today or tomorrow. I exited all my call trades and I started nibbling on puts, which I will add to if the market confirms a rollover, or perhaps if the market extends the upswing a little further. As always, I don't know the future, but so far things are playing out like I expected them - all the way down to the squishy economic reports and the Brokers playing the earnings game like a Stradivarius.

8:25 am MT: I added a little to the DIA, SPY, Q's, and KLAC puts.

8:55 am MT: I picked up some puts on EMR. Now, again, this is just a reminder: the market may continue to try and push up a little today and tomorrow, and there are still some bullish movers, so I'm nibbling and positioning on puts rather than running like my hair is on fire to pile into puts. The bullish moves today are in Chemicals/Agriculture, some Energy, some Coal, and some Tech. Stocks like UPL and NBL are making nice bullish moves, along with a number of others. However, I am starting to focus more on puts myself.

Of all the news this morning, I think the most significant is that Industrial Production and Capacity Utilization missed estimates. The indication is that the economy is not picking up any steam, while at the same time Energy and Goods inflation are moving up (PPI came in higher than expected). The numbers continue to show an economy that is not in a recession, but is not robust either. The economy is crunching along with some significant issues (inflation and attenuating consumer spending along with the Financial industry writedowns) that traders are unlikely to really push the market up strongly, and we will probably even swing down a little sometime in the next couple of days.

9:25 am MT: I nibbled on some OMC and NSC puts. There are some other possible bearish forming stocks like PH, IR, UTX, and several other Railroads.

9:45 am MT: The SPX is at a key short-term tipping point. If the SPX can hold 1,353 - 1,355 then the market may bounce for awhile, possibly until tomorrow. If the SPX fails at the point mid-day, then the market is unlikely to recover today and we will probably see a confirmed rollover after a gap and fade out of the open. A drop below 1,350 will probably mean a quick move to 1,345, at which point I will start scaling out of my puts. It could happen today, it could happen tomorrow, it might never happen, we shall see.....

1:00 pm MT: The market has sloshed through the mid-day and is still holding the key intra-day support levels. The Dow is taking the lead as the laggard, in other words it's the softest index right now. The 12,180 level is pretty key intra-day and the Dow is assaulting it right as I type. So we are at a late-day tipping point. We'll see how this goes, but it still looks like a fade.

1:17 pm MT: The Dow failed at 12,180. It is very likely that we finish the day in the red.

1:50 pm MT: I sold the NSC puts with the stock down and sitting on the 50dma. Normally I would ride with a confirmed rollover, but the Railroads are a bit of a cult trade, so I want it to clear some more of the trash down below before the next put. I made .50 cents or 13.5% intra-day. I also sold a small part of the JPM puts for a .55 cent profit, or 14% gain intra-day so far. With JPM I wanted to take a little off ahead of the MS earnings tomorrow morning, just in case.....I also sold half the SPY puts for mostly the same reason, the biggest sector weighting on the SPX is the Financial sector. The SPY puts are a .60 cent profit, or 15% gain intra-day so far.

2:15 pm MT: I told you I was going to be active on Monday and Tuesday.....Very nice calls from Friday through Tuesday, just like I posted. And very nice puts so far, after the last move up in the upswing this morning started to fade. In case you were wondering how to turn on a dime, I demonstrated it for you right in front of your eyes. The key is preparation, you have to come to the market with an idea, and some research, and you have to be ready. There are plenty of times I do a lot of work and then the market doesn't do what I thought it would do, but I keep doing the work, because many times it does play out fairly close to or even exactly like I prepared for, and I make money. I have tacked on over 4k to my account profits since Friday. I'm now up to 73.5k profit in the Papermoney demo account since January (starting with a 50k account size equivalent), which is about 147% account growth so far this year.

Market Wrap: The Dow confirmed a rollover today. The other indexes look like they are forming Bear Flags. Financials really gapped and dumped (gap up and dump down). Energy and Chemical stocks were the strongest broad area, with everything else looking squishier or down. I am still going to be active getting in and out of puts tomorrow, and maybe for several more days. I am also looking at a few of the Energy and Chemical stocks for potential calls, just because I know how desperate the Fund Managers are to have some part of their portfolio stay in the green. Look for the MS earnings to have some impact in the morning, and the Oil Inventory Report to affect Energy stocks 60m after the open. Outside of that, barring a news bogey, it will probably be a technical move, which means we are probably headed down, we shall see.....

Here is a list of interesting bullish stocks in the Energy sector:

UPL, HP, NE, MRO, NBL, PXP, and NFX.

There are others, but I might dabble a little in a couple of those tomorrow. Be aware that the Oil Inventory Report 60m after the open will probably move the Energy stocks one way or another.

Here is a list of interesting bearish stocks (some of which I have puts in already):

Financials: ICE, JPM, PRU, STT, MER, LEH, MS (earnings tomorrow), AXP
Index ETF's: DIA, SPY, QQQQ
Railroads: NSC, BNI, UNP
Tech: KLAC, ESRX, ADBE (Head and Shoulders Top today) (Note: SOHU might form a H/S Top)
General: EMR, PH, UTX, IR, HON, NOC
Note: X rolled over today and AKS is fading with some selling, is this a sign that Steel is weakening?