Nasdaq Bounces While Market Contemplates Next Move

The market opened quietly and a little down after the Jobless Claims number missed expectations slightly. The indexes are simply holding support levels while the market awaits the Philly Fed report and the Leading Indicators report.

I took profits right out of the gate on the BTU call, and I locked down a few more of the puts while we await the economic reports. The BTU call was a 2.55 profit, or 44% gain for a few hours of trading from yesterday to today.

8:03 am MT: The Philly Fed report came in quite a bit worse than expected, which immediately dropped the Dow through support and pushed the SPX to the brink. Leading Indicators was in-line with expectations, which brought the market most of the way back. The battle begins in earnest now, and it looks like it's tipping slightly in the bears favor, but we shall see.....

8:30 am MT: The SPX is battling along the 1,331 support and the shorts are getting nervous. At the end of the day, it will be interesting to see if the level holds or not, I suspect it won't. If it's up to some of the twitchy Hedge Fund managers, then we could be awhile before we know. As it is, I decided to pick up some more SPY puts on a separate trade and see if I can make some money on a breakdown. We shall see.....

8:40 am MT: I could be wrong, but I don't think anything significant technically will happen for at least another hour or more, maybe until later in the trading day. I think there are too many Hedgies playing right now and the Big, Smart Money Managers are sitting on their hands. I think that the Smart Money is waiting for the Hedgies and Day Traders to finish putzing around and then they may step in. I suspect that they will sell the market, but whatever it is, we may not know for several hours.

8:55 am MT: I sold everything I had at market orders just now and cleaned it all out. The Shorts-Coverers and Bargain Hunters are playing off the report out of China that the government there intends to raise fuel prices to slow demand. I'm always amazed at the lack of insight and intelligence from some major fund managers when they read a report like this, but I guess that's why not all of it is "Smart" Money. The report means practically nothing in the bigger picture of the energy problem and the current economic conditions, and in fact the price of oil only dropped in to the mid to low 130's over the report (here is where I give a big shrug and a yawn). Be that as it may, it's killing the rest of the downswing for now. And it's adding choppiness and aggravation to the market and trading. I'm neither a bear or a bull, probably, for the rest of the day.

9:10 am MT: Well, it looks like the "Dumb" Money played right into the hands of the "Smart" Money, because some pretty big sell orders just came in and clobbered the short-coverers. I went ahead and picked up some SPY puts again, because, after thinking about it for a moment, I decided that I'm going to go ahead and speculate that Smart Money will eventually sell enough that the SPX will break the 1,331 support. So I guess that makes me still a little more bearish in the current downswing. We shall see.....

9:30 am MT: Here are the final numbers on the put trades: DIA was a 1.23 profit, or 38% gain. SPY (the second trade) was a .07 cent profit, or 1% gain, SPY (the third trade) was a .35 cent loss, or 10%. QQQQ was a .35 cent profit, or 17% gain, QQQQ (the second trade) was a .07 cent profit, or 3% gain. KLAC was a 1.18 profit, or 33% gain. OMC was a .14 cent profit, or 4% gain. And EMR was a .56 cent profit, or 40% gain. By the way, by gain I mean return on investment, for those of you who are new to following me. All in all it was some nice trades, but I would have liked to ride the puts a little more into a full downswing. But as you know by now, from the choppiness of the year in trading we are having, it's better to take profits sooner rather than later. I am still riding one set of SPY puts in case we do finish out a full downswing, that's all I'm willing to risk in speculating on the full move.

12:50 pm MT: It's pretty obvious that traders are going after Big Tech stocks later in the day. The Naz is leading the buying today, and the Nasdaq-100 is leading the Naz. I'll keep chewing on this a bit and decide if I want to buy some calls on a couple of Tech stocks before the close.

1:30 pm MT: I nibbled lightly on calls for CTSH and STLD.

Here are some more interesting bullish movers today:

Tech: ENER, CTSH, QCOM, ATVI, RIMM, AAPL, WDC
Steel: TS, X, STLD
Railroads: NSC, UNP, CSX
Biotechs: GILD
Other: DHR, PH, AMZN, CMI

I'm keeping my SPY puts for now as a hedge against this all being a giant head-fake. I'm dialed way back on my positions and watching and waiting. It could be that the downswing is over, it's probably over on the Nasdaq, which looks like a bounce today. So I don't want any puts (other than the hedge). I'm also not getting too excited about calls either. It may be that there is a little trading to do before the weekend, but I'm not sure we'll get something like last Friday.

If the SPX moves above 1,350 then I will stop out of my one put and I will start adding to the call positions. I like the bullish list above if the market does keep bouncing up. I will also look for other movers and shakers during the day. Tomorrow is options expiration, so we may see quite a bit of gyrating around. I may not do a lot of trading tomorrow, but we shall see.....