Market Pops as Oil Drops

FNM managed to miss even catastrophic expectations, which isn't easy, but as we can see from FRE, AIG, and many other Financial corporation management teams, it is possible with hard work, irresponsible speculation, incompetence, greed, and a little good old fashioned street dumbs. FNM is down 17% in pre-market trading.

Oil is down, however, which is giving pre-market futures a little boost. Here is a current snapshot of the price of oil on the charts, look what we are testing.....support (short term).....this is getting interesting..... There are enough crosscurrents today that the stock market may act a little nutty. If you are looking for puts, keep one eye on the price of oil, if we go through support, then you probably don't want to be in puts today.

Here is the current chart of oil:
(click on image to enlarge)

Stay in tune with that oil chart today. The Market may Drop and Pop a little (which it did out of the gate) because the corporate news was bad but energy news is "good." I am probably, not definitely, but probably not going to play puts today. If I see a really nice setup on the 30m charts I might play puts, but I won't touch them if the Dow goes above 13,525 - 13,530.

The problem is that if oil drops through support and stays down, perhaps testing my $116 target, then the Shorts won't be able to stand it and will probably start covering. At the very least it could make for a back and forth day. If we stay tight, I won't even bother thinking about unwinding my Iron Condors until next week, if I do at all. I might as well take advantage of another two days of time decay, especially if we don't get a momentum day today, either up or down. I warned last Friday that the market was going tight, and although traders loosened up a little with the price action early in the week, it looks like we could see a more indecisive day, and not a momentum day to the downside. It will probably hinge on what oil does, we shall see.....

7:45 am MT: When CCL tested the gap first thing, I stopped the calls for as much as I could get, which was a loss of .63 cents. CCL is a tough one because it had a pretty good gap down yesterday that turned into a form of a Kicking Pattern, and now it's testing the other side of the gap. Sometimes you just get caught in these and that's how it goes. It's also why I keep sensible rules of position sizing as well as other areas of risk management.

8:20 am MT: The Dow made it all the way to 11,620 and then some, so we definitely have a Drop and Pop. The big push came as oil dropped through short term support and headed to the next support at $116 (it actually hit $115.72 and bounced a little). Oil is still dropping, which is bullish for the market. I stopped my DIA and SPY calls from several days ago for small losses because they were partial size positions (1/2 and 1/3 respectively) although they could be good plays later in the day. I lost .73 cents on the DIA and .80 cents on the SPY. I'm keeping the AMZN calls because the market may actually break out to the upside today. The Shorts have to be just screaming, and the bulls look like they want to push them right through resistance at 11,700. If you have some left over calls, you may want to see if some of them will run for you a bit. I'll look at my watchlist and see what else I like. I also have an order to pick up some Q's calls and some MMM calls on a little pullback intra-day. I'm not looking at puts anymore, I didn't pick any up, and I probably don't want any today.

8:45 am MT: I started picking up some Q's calls, and I have an order in to pick up the DIA and SPY calls that I stopped right around the price I sold them. I like the chart construction so far this morning, which looks like it's more bullish than bearish. I don't want to get too crazy with the up and down market we have had, but the bulls have been pretty resilient given all the bad news.

12:15 pm MT: The market looks like it will finish with a bullish reversal after the bearish reversal yesterday. I like the resilience of the bulls right now. I made some money on AMZN and the Q's and I'm looking to get back in before the close. I'm also looking at DD, UNP, DIA, SPY, MMM, KSS, and HOT among others. There's a pretty wide list of stocks that are jumping today. I'm probably going to pick some calls up that I hold over the weekend (gasp!). I'm watching for a late day wiggle to pick some up and then see what happens Monday and Tuesday.

Market Wrap: The market came back from yesterday's selling with a lot of strength. The Dow closed at a new 30 day high and cleared resistance at 11,700, which was both a horizontal price resistance and the 50 day moving average. The SPX also cleared horizontal resistance at 1,291 and closed right at its 50 day moving average. The Naz outperformed the other two indices Wednesday - Friday and appears headed towards its 200 day moving average at 2,437. All three indexes are intermediate term bullish.