Nasdaq Bounces but the Rest of the Market Doesn't

Important Notice: make sure you read the Market Wrap at the end of today's post.

Durable Orders came in flat, but in-line with expectations. In other words, less than catastrophically bad. That's enough to give the market a slight boost out of the gate. I will watch the first few minutes and decide if I want to lock and walk on my puts. I will probably just sit tight ahead of the Fed.

7:35 am MT: I going to basically do what I said and sit tight on the Bigger Picture. Because my positions are so small, the only put I'm willing to get out of just yet is the QQQQ trade. I want to really stand back from the gyrating and freneticism of the Day Traders as they try to make something out of nothing ahead of the Fed. I will go birdwalking through my Watchlist and look for the next idea, but I'm not looking to do much until late in the day.

8:15 am MT: I decided to cull out the IWM puts for a small .05 cent loss, which is basically a scratch trade. I'll dink around with the tiny put positions I still have on SOHU and the Q's. I may get out of those as the day goes along, but I'm not doing anything dramatic right now.

8:35 am MT: I don't want to watch all the minutia of the Day Traders today, so I sold the last two small put positions. I lost .19 cents on the Q's, and I made .21 cents on SOHU. By the way, for anyone who asks me if I'm a Day Trader because I'm taking my Swing Trade profits on the same day sometimes, or taking the profits quickly.....Here is yet another example of how I had three profitable Swing Trade entries yesterday that I could have locked and walked intra-day yesterday, and instead I chose to carry part of the position overnight. I took 3 winners and turned them into 2 losers and a partial winner. So I paid the price for holding a Swing Trade too long in a Choppy Market. I know I keep hammering on this, but the market is too volatile this year to expect 4-7 day swings most of the time like you would get in normal trending market conditions.
It's interesting because I get comments by "others" all the time like: "Dwight, you're just scalping" or "Dwight is flying around on fire blasting in and out of trades" or "Dwight, you're just generating a ton of commission as you churn and burn through options all day long" or "Dwight you're just a Day Trader" or "Dwight your way of doing things is too fast and too crazy" etc. etc. etc. Those types of comments are coming from less experienced "others" who don't know how to constantly adapt to ever-changing market conditions. Those of you who are directional swing traders will continue to do yourself a favor this year by keeping swings to 1-3 days and taking profits sooner rather than later. We may eventually get back to less choppy conditions, but until then, be nimble.
I will continue to throw out Iron Condors from time to time for those of you who don't want to be directional swing traders right now.

12:20 pm MT: And the Fed announces.....Nothing! Ta daaaa!.....So there was no policy change, and they think the risks for inflation are increasing (however the Fed expects inflation to moderate.....Which is another way of saying that they hope the economy will slow down enough to drop inflation so they don't have to raise interest rates too soon and look like stooges who mishandled the interest rate cuts). Be that all as it may, we are getting a Technical Bounce today, and the Naz may finish with a Morning Star Reversal. I'm not buying the bounce because I won't be able to trade tomorrow, but it's probably worth nibbling on with calls because the bullish swing may last for another day or two.

12:50 pm MT: I paper traded an Iron Condor on SPY again today: a 124/125 (bull put) and 138/139 (bear call). The net credit is paying out anywhere from .30 - .32 cents, which means that it's probably close to .30 cents even on a TOS real money account. So .30 cents of profit with .70 cents of risk, or a 43% return on risk for 22 1/4 days or about 16 1/4 trading days (Fourth of July is in there gobbling up time too!). The short sides are beyond two supports and two resistances as well, so about an 85% probability of success whether you assess that on the charts or on the TOS probability analysis parabola. Any way you slice it, it's a pretty good setup.

1:00 pm MT: I did decide to nibble on FCX and CF calls based on the Hammers that are forming today.

1:45 pm MT: I added a little to the FCX and CF calls. I'm not looking to play much over the next two days, so this is good enough for me, especially since I won't be able to watch it very much tomorrow.

10:15 pm MT: Market Wrap: The Nasdaq bounced with a close-to-perfect Morning Star Reversal, but the Dow and the SPX didn't follow. Earlier in the day Financials, Retail, Tech, Homebuilders, and Cyclicals were all leading the way. But just before the close most stocks in those areas sold off, with Tech managing to hold on to some of the gains. At the same time, a lot of Energy and Commodity stocks, which were selling off early in the day, bounced towards the close. The trading activity by the end of the day was following a three month long theme of buying Energy, Commodity-related, and Tech stocks, while selling Financials, Retail, Homebuilders, Cyclicals, and Consumer Discretionary stocks. Normally I would still be looking for a bounce tomorrow on the Dow and SPX, and a carry through on the bounce from the Naz, despite the end-of-day gyrations. However, after the close RIMM missed earnings and dropped like a cannonball welded to a meteorite. RIMM was down over $11.00 in after-hours trading. In addition, ORCL announced earnings after the close and dropped 3.5% in after-hours trading. And if that wasn't enough of a dog-pile on Tech, ADSK gave earnings guidance after the close and dropped down 2.5% in after-hours trading. Now, that may sound like a lot, but it actually gets worse. In more after-hours trading NKE dropped almost 5% after their earnings announcement. BBBY is the only company of note that is actually up in after-hours trading from their earnings announcement.
It looks very much like the Naz will gap down at the open tomorrow, maybe as low as 2,375 - 2,380. About the only thing that might keep the market afloat early in the day is a positive GDP report, which is due out before the open. If the GDP report can't prop up the Market, the Naz could drop below the 2,368 - 2,375 area, which would signal the possibility of its 3rd Bearish Kicking Pattern in the month of June. A drop below 2,368 - 2,375 would be a potential put opportunity for a move back down to 2,350, and perhaps even lower, over the next several trading days. It could also mean a quick drop on the Dow to 11,600 - 11,700, and a drop on the SPX to 1,295 - 1,300. I don't know if all this will play out, but be extremely cautious about long positions at the open tomorrow morning. We are probably in for a pretty volatile early day of trading, we shall see.....

It is possible, if we get a decent GDP, that the selling is more isolated in Tech, and some sectors may actually try to bounce a little. But tread lightly at first tomorrow morning. I will be looking to exit my two half-sized call positions in FCX (Copper) and CF (Chemicals) early in the day if the market is selling off too much.

One other note: I will only have time to open a post and make a comment or two before I have to go away tomorrow morning. I will be back later in the day to post a market wrap, but I won't be on VC tomorrow night.