Market Theme Continues: Lumpy and Squishy

Futures are up pre-market on limited news. Oil dropped to $142 per barrel, but that's normal fluctuation. Traders are more focused on the "chatter" about the P/E Ratio of the SPX sitting at 20.84, which is the lowest level since April 11. This is just the kind of yip yap that makes the rounds when traders are looking for an excuse to buy a short term oversold condition. If the market does bounce for a couple of days, it wouldn't surprise me.

There isn't much point in wading into the market full throttle this morning. I'm going to let it show itself a bit early in the day and then see what areas are picking up momentum one way or another.

Here is a link to the Day Trading Rules that the SEC created in September of 2001:

http://www.sec.gov/answers/daytrading.htm

Notice how even the SEC defines Day Traders with this type of language:"rapidly" and "seconds to minutes", which is why I have expounded at length on why I am a Swing Trader and not a Day Trader. The illogical thing is that the SEC mandated a four trade limit for Pattern Day Traders which doesn't make sense with their own definition of a Day Trader (scalping nickels and dimes every few seconds to minutes throughout the day is a whole lot more trading than four). Well.....it is what it is, like I said before, somebody at the SEC was determined to "save us from ourselves."

Here is another link to an easy to read explanation (by the way, I don't know anything about the site, I'm not interested in the site, but they had a good explanation so I went with it):

http://www.daytradingworld.com/day_trading_rules.html

8:00 am MT: the market is bouncing a little out of the Gate this morning. The Dow is very likely headed to 11,500 and possibly higher. This doesn't change the IT trend, as I stated on the Market Posture from Watchlist Saturday, but we are probably getting the ST bounce that I warned of in that post.

8:15 am MT: all the "oversold" stocks from Wednesday, that started to turn or even Hammered on Thursday, are the biggest movers this morning: Chemicals/Agriculture, Coal, Steel, some Energy, and some Tech. ENER, TRA, AGU, NOV, ESV and some others look interesting for calls, but they have already moved too far too fast for me, especially knowing that it's probably short-covering. CELG looks pretty good this morning, and I will probably add to the trade if the stock moves over 70. I'm still looking around, I like the bearish put setups that could form in the next few days on the Coal and Steel stocks. I like PX as well, I'll watch for an intra-day consolidation and see how it holds up.

8:35 am MT: I nibbled on very small (less than a 1/4 size) call positions on NOV and OXY. I like how the stocks are holding up, but I'm also aware that the catalyst for a market bounce this week could be a drop in oil prices, so I don't want very much. I'm still interested in PX, but I want a little more pullback intra-day. I may start a small position fairly soon, but the .40 cent spreads on PX need to close down. If I don't see better spreads this morning I will probably just pass on the trade.

I really don't want very much right now, just a few nibblers here and there as I watch to see if the market really does bounce.

9:00 am MT: I nibbled the same type of small call position on FLIR. I like the look of GDP and ATW, but the spreads are very wide, especially on GDP, so I'm just sitting tight on what I have and watching for the next idea. I don't think I will be picking up much else today, but we shall see.....

10:40 am MT: I got rid of the OXY and NOV calls, they were very small positions, so the total losses were $280 and $360 respectively. I'm going to stay with everything else for now.

I also picked up puts on ALL, TRV, and HIG. The HIG play will be pretty quick, but the I'm looking for the ALL puts to run for a couple of days.

11:05 am MT: I got rid of the FLIR calls for a .65 cent loss on a 1/3 sized position. The market doesn't appear ready to bounce yet. It just can't get any traction, even after a nice early move today. I tested the waters with some small call trades today and I can tell that traders are simply not in the mood for anything bullish yet. At this point, I will wait for a confirming signal before I go in with a larger position on any calls. I still like CELG, which has been a real strong stock in the face of the market conditions.

11:15 am MT: The SPX continues to chug down as sectors sell off pretty much across the board. Traders appear to be in no mood to speculate ahead of earnings in any sector. Right now I'm playing a few puts, but I could add a little more in the areas of Steel and Coal. I would have preferred one more day of bouncing in those areas, but it could be that traders are still dog piling those stocks.

1:30 pm MT: The SPX and the Naz are trying to Hammer back towards the end of the day. I added a little more to the CELG calls, which are working out nicely so far.

3:00 pm MT: Market Wrap: The market gyrated back and forth today and finished down a little. The short term downswing is losing a little momentum, and the Naz is trying to turn a little to the upside. YHOO helped the NDX finish in the green, and helped the Naz finish with a Hammer-like candlestick. I'm not making too much of today other than the short term downswing is still there, but not picking up any momentum (look at the chart of the Dow to see what I mean). However, bulls can't get any traction right now either, so I'm trading pretty lightly. Watching this market the past few days is kind of like taking a big square of vegetable Lasagna, wrapping it in cellophane, leaving it on the counter for 6 hours, and then slapping it against your humid bathroom wall tiles while the shower is running at full steam.....Lumpy and Squishy. There are trades here and there, but nothing to get incredibly excited about. I do like my positions going into the close. The CELG calls look good, and are making me money. The Insurance Sector puts (ALL, HIG, and TRV) are also looking nice as all three stocks confirmed a rollover today. I really like the potential put setups forming in Coal and Steel, but I'm also leery of the overall market being pretty overcooked short term. There's not much else to say about today. I haven't changed my early week opinion all that much, so I'm just sitting on the four trades and watching to see what happens tomorrow.