Market Finally Bounces

Benny is trying to rescue the Financials again after the meltdown yesterday at FRE and FNM. The Fed stated that it may continue lending to Wall Street Firms (Financials) through 2009. The Fed announcement is probably the right thing to do in order to stabilize the Financial sector. The market also liked the early drop in oil futures into the $139 area. Traders may attempt to bounce the market early in the day again just like yesterday.

7:50 am MT: I have two full positions on CELG which I am starting to scale out of. One trade is from yesterday which I locked down this morning for a .75 cent profit or 12% gain. The other trade is my original trade, which I started last week. My max target on CELG was 71-72 and the stock made it to the 70.30 area this morning, so I sold 40% of the original trade for a 1.27 profit or 22% gain. If CELG makes it to 71 I will be out of 70% of the position.

8:15 am MT: CELG is trying to get it done right now, so I took a little more profit with the stock at 70.70 and I'm looking to take a little more if it reaches 71.

8:25 am MT: Steel, Coal, Chemicals and other Commodity based stocks are dumping again. Energy stocks are dumping as well. I really wanted a couple of Steel puts (X, NUE, or SCHN) and a couple of Coal puts (MEE, CNX, or ACI), but now I'm going to wait for an intra-day bounce. They sold off about one day earlier than I thought they would, but that's how it goes with trading, you don't always catch every train perfectly.

8:40 am MT: I picked up some nibbler puts on X, CNX, and ACI. I really don't like that I had to chase these, so if I see another quick, sharp drop in the next hour, I'll probably look to sell and then wait for another bounce to buy again. If we get a big intra-day bounce on the stock then I will look to add to the positions in about 2-3 hours.

9:30 am MT: I added a little bit to the X, ACI, and CNX puts. I have 1/4 sized positions on all three, so they are pretty small. I'm also looking to take out of the HIG puts, and maybe the TRV puts in the next 2 hours or so. I don't like the Benny Bogey this morning, and he seems to have a habit of yapping right when I'm playing puts on Financials. I still think it was the right thing for him to do, I just wish he would have waited until tomorrow afternoon before he swooped in to "save the day." I still like the ALL puts a lot, that's a nice looking setup. Now to see if it works.

10:00 am MT: I stopped out of the TRV puts. I made .22 cents on a put trade on TRV yesterday, and I lost .42 cents on the put trade today. The net was a minimal loss of 9%. I want to keep the HIG puts for now and see where it goes. I probably won't let go of the ALL puts because I really like the price action on the stock.

1:35 pm MT: I sold the last of the CELG calls as the stock moved into the area of my resistance zone of 71-72. The total trade was a 1.76 profit, or 31% gain on a full-sized position.

1:50 pm MT: I bought calls on ELN and WYE. Since the Steel and Coal puts are 1/4 sized positions, I will add to the puts on those trades in 1-3 days when the stocks finish rolling up. The Insurance puts are a little testier, but ALL still looks good. HIG is the only trade I don't like, but it is a small enough position that I will add to it on a 1-3 day bounce or take it out on any wiggle down tomorrow.

The market confirmed a bounce today, but only two of the four major indexes confirmed, the Naz and the RUT.

2:30 pm MT: Market Wrap: the market got the double-whammy of falling oil prices and a Benny Bogey to start the short-term bounce that I was expecting yesterday. Only the Naz and the RUT officially bounced, but the Dow and the SPX will probably follow. I am still expecting a move on the Naz to 2,300 and perhaps as much as 2,315 - 2,325. The SPX could run up to 1,300 (especially if the Naz can make it to 2,320). And the Dow could make it to 11,650, and perhaps as far as 11,750. If we do get the bounces ahead of Earnings Season (GE will be the first major company to announce this Friday, although traders are gyrating over the AA earnings going on right now), then I expect GE to be the next formal catalyst on Friday for the possible current upswing. By that I mean that the market might bounce from now through Friday. Next Monday we get all the Banks starting their earnings and then we get INTC next Tuesday to really kick things into high gear. Peak volatility should be next Tuesday through Thursday. If we do bounce for 2-3 days, then I will use that as an opportunity to unwind the lower legs (Bull Puts) on my Iron Condors for the DIA, SPY, and IWM. I want to unwind the Bull Put spreads for as little as possible so I have a good chance of making nice money on all three Iron Condors.

As for the Insurance puts, I will look for any type of pullback tomorrow to exit as gracefully as possible. The other 1/4 sized put positions on X, ACI, and CNX are true Cherry picks, so I have a lot of room I can give those stocks before I add to the positions.

6:30 pm MT: Here are a couple of evening notes after I had a chance to run up and down my watchlist: I really like AAPL for calls, with the channel breakout today coinciding with the big bounces on the Naz and NDX. AAPL has a very good probability of getting to 182 - 182.50 and perhaps even running as much as 5 - 10 points. On this channel breakout I would normally be targeting 210 - 220 but I have three reasons to keep the trade short. One is the Naz is in a downtrend. Two is that the AAPL breakout came on below average volume. And three is that AAPL has earnings next week. However, the earnings report could be the catalyst for this move, so I think this is a call trade that I will add to the Papermoney demo account tomorrow.

For call trades: In Tech land I'm also keeping an eye on IBM, WDC, and QCOM. In Biotechs/Healthcare I played CELG and I got into ELN and WYE, plus I'm watching GILD and MYGN and to a lesser extent, DNA and MDT. In Retail I'm watching WMT, KSS, and COST. In Chemicals I'm watching POT, MOS, and TRA.

I'm going to be stopping out of the Insurance puts in the morning. I think the Benny Bogey will set off way too much short-covering for my taste. I'm not bullish at all on Financials, but I don't feel like going on Benny's wild clown ride at Wall Street World. I will also be selling X if I have a profit, and deciding if I want to hold the small ACI and CNX positions or not. I think we could see a 2-3 day bounce, although I'm still bearish on the Steel, Coal, and some other Commodity related stocks. Energy stocks threw a lot of Hammers today, but I think we are going to see a bunch of lower highs, and I don't want to go on that ride right now either.

AA beat earnings a bit and is trading up modestly after-hours, which might give Metal and Commodity related stocks a little boost in the morning. But just like with Energy stocks, I think there are a lot of these types of stocks headed for lower highs. We shall see.....