Dead Cat Bounce Today

Stock futures are up substantially on a typical dead cat bounce relief rally after the implosion yesterday. Traders are pointing to the bailout as a catalyst. Several politicians have been yammering that the bailout will still go through, which has kept trading in Asia fairly orderly and given U.S. stock futures a boost.

The dead cat bounce should not be a surprise after a 777 point drop on the Dow yesterday, which was actually the best performing index by percentage. As for the bailout.....I know it's unrealistic to hope, but I hope that politicians go in and strip the bill completely down to a simple $700b targeted to buying mortgages that will all be re-sold on the open market during the next 5-10 years. I hope that all the special interest, self interest, and socialist measures get nuked out of the bailout. I fear that it won't happen because these are politicians after all, but I suppose there is always a fools hope.

I speculate that the stock market will probably have a pretty good bounce by points and percentage for much of the morning (with a few violent intra-day swings in the process), but that the overall recovery will probably stay below the 1/3 - 1/2 point of yesterday's sell-off. We shall see.....

12:30 pm MT: The Dollar is up sharply, Oil is up strongly, and the Stock Market is up strongly. Normally a rising Dollar would drop Oil, and normally a strong jump in Oil would drop the Market.....so goes the market these days. The dead cat bounce is playing out pretty closely to what I expected this morning. We may see an end of day drop, but even that will probably be met with some buying into the close. I expect the dead cat to stay in the air today, and I expect the trading oscillations to settle down over the next couple of days until we get the next mega news bogey.

The Dow is fighting with the 50% retracement of yesterday’s drop right now (10,750), which is the bounce I was anticipating this morning. The SPX and Naz are also fighting with their 50% retracements of yesterday’s dump. This is probably the gassing out spot for now, which means we could see a drop over the next hour or so before a bounce into the close.

4:00 pm MT: Market Wrap: Well, it wouldn’t be 2008 without a 777 point drop in the Dow followed by a 485 point jump a day later.....This is beyond even the wildest roller coaster rides imaginable, but I’ll take the comeback today with open arms, especially in our current market environment. I’m not even going to try and do any technical analysis of the price action today. Normally I would have pretty good idea of whether I wanted to buy calls or puts, but every day is a new day in our wild, wacky 2008 stock market.

I did go up and down my watchlist and look at my universe of 300+ stocks today, and I found a few interesting stocks to watch.

Bullish: I like how some Financials are doing right now, especially WFC, but also USB, BBT, COF, and MET. I also like WY, KMB, and GIS. Finally, Gold is still hanging in there with ABX leading the way but AEM and GG also looking interesting.

Bearish: I think the Chemical Agricultural group is finally bouncing, so I’m watching for Bear Flags on CF, AGU, and PX, and perhaps MOS. Certain Manufacturing/Machinery stocks look interesting if they have Bear Flags including CMI, ETN, and DE. Tech is wild, but RIMM could be interesting if it has a Bear Flag.

I’m still taking this day to day (sigh.....), what can I say? Just keep plugging away, and don’t feel obligated to do a lot of trading right now.....

Stock Market Takes a Historic Dump

Pre-market futures are down considerably this morning on Financial news that has traders focused on the half-empty portion of the glass. Citigroup is buying WB in another FDIC facilitated deal, which seems to be the trend these days. In addition, traders appear to be nervous over some elements of the $700b bailout that heads over to the House of Represenatives for a vote today.

I'm not going to play around with much early in the day, including Gold. It's getting very difficult lately to guage when the market is going to have a sell-off day, or when it's going to gap down and hold the line. Anything new that I do today will be intra-day on short swings. There's still too much uncertainty and chart violence for me to get really solid about a direction.

1:00 pm MT: This has been a violent day in the stock market. The bailout was shot down in Congress today. Here was the final vote: 207 for, 226 against with a total of 218 votes needed to pass. This was the breakdown of the vote: Democrats 141 for, 94 against. Republicans 66 for, 132 against. It was somewhat surprising to me that Nancy Pelosi was unable to get just 11 votes out of the 94 Democrats who voted against the bailout. It appears that the issue was the news that came out a couple of days ago that the bailout bill got “dirtied up” (which isn’t necessarily that surprising when politicians and money are in the same room together). From recent reports it looks like the bailout was restructured so that 20% of the potential profits from the bailout would be moved into the Housing Trust Fund, which is a slush fund for political action groups like ACORN and the National Council of La Raza. It also appears that this bill could be the genesis for socializing banks and pension funds, which would be a disaster to capitalism. I would guess that many Democrats and Republicans were highly concerned about the “corrupting” of the bailout language and voted against it. My only comment, which I am keeping politically amoral, is that it’s too bad that some politicians focused on their own self-interest and dirtied up the bailout so it had little chance of passing a vote. It appears that the market will have to correct itself, which isn’t necessarily a bad thing, it just means that some more Financial institutions will probably become extinct.....

4:00 pm MT: Market Wrap: Well, that’s over with.....

Dow 10,365.45 -777.68, -6.98%

SPX 1,106.42 -106.85, -8.79%

Naz 1,983.73 -199.61, -9.14%

The Markets are definitely Intermediate Term Bearish and Short Term Bearish.....This was the biggest one-day drop for the SPX since the dreaded 1987 crash. The Dow had its biggest one day drop in points ever. And the Naz actually had a bigger percentage drop than either of them.....and the Naz-100 actually dropped even more than that with a 10.52% drop.....

The major indexes are potentially setting up for a dead cat bounce off of an extreme oversold reading. However, the Dow doesn’t have support again until about 10,000 – 10,100, the SPX has its next support around 1,075 – 1,080, and if the Naz doesn’t hold key support in this 1,985 – 2,000 area it could drop to 1,900. The VIX hit 48, but that’s still 9 points below the 57 reading that ended the last Bear Market. So we could see a little bit more selling tomorrow, relatively speaking, before we see a dead cat bounce.

As usual, for directional trading, take this day to day and play the intra-day short swings. We had a violent day, which could get a little more of a tremor type of aftershock tomorrow before it tries to bounce a little. Any big news on the bailout would only add to the volatility.

Bailout Gets the Green Light

The White House/Hank Paulson led bailout finally pushed through Congress and it looks like $700b dollars will be targeted towards the mortgage market. The news should give Financials a tailwind tomorrow. It will also likely drop the Dollar, which will give Energy and Commodity stocks a tailwind. Gold may be a little more conflicted because money will want to flow into Gold on the falling Dollar, but money will also want to flow out of Gold and towards more bullish stocks.

I have to do the quick version of this post because I have been focused on family concerns all weekend, but here it is:

I am Intermediate Term Neutral and Short Term Bullish on the markets. Tomorrow I will be focused on Financial and Energy stocks for calls, along with DIA and SPY.

Here is a quick Bullish Watchlist:

Financials: JPM, WFC, BAC, BBT, COF, RKH, USB, STI, PNC, KBE

Energy: RRC, OXY, ECA, USO, BHI, CVX, XOM, COP

Gold: ABX

Cyclicals: KMB

Healthcare: CEPH

Food&Beverage: GIS, PEP

Also note: WY, RYL, TOL

I apologize that I haven't been able to spend much time answering comments and questions, but keep commenting to each other, as you have been, to support one another's trading. I will try to catch up a bit this week.

Market Catches a Tailwind off Dropping Oil

The stock market is dumping down on the news that GDP missed estimates and RIMM guided down earnings. In addition, trader's are treating the WM buyout news about as gleefully as an announcement of leprosy. Yesterday's bounce is a non-event today.

I'm not even going to bother with my bullish list from yesterday, everything is cratering this morning. I thought today was going to be volatile, but it's even more violent than I expected. The bailout hangup is probably exacerbating the selling. Any thoughts I had that the market might be shoring up a bit are gone, the extreme fear is still lurking in every corner of the financial markets ready to hurl its guts all over Wall Street. Today looks like a gut hurling day.....The volatility drumbeat goes on.....

12:45 pm MT: The drop in oil prices and the speculation that the Financials are going to stabilize a bit has put a bid under the market. For call plays: I like the price action on WFC, PNC, USB, and BAC in Financials. I like KSS in Retail, I like KMB in Cyclicals, and I like GIS in Consumer Staples.

The Energy and Commodity related stocks are selling off a bit today. Chemicals/Agriculture, Coal, Energy, and some of the Metals. Most of those trades look a bit overcooked, but I'll keep an eye on them.

This has been a volatile day, which I expected, and it has featured a few mood swings. I will keep playing most directional trades as very short swings. I'm not convinced that the Bulls are going to turn this into a big turnaround day, so I'm not interested in getting loaded up before the weekend. These kind of days take a lot of focus for directional traders.....otherwise, just walk away and watch for something to emerge next week. It's usually a good idea to stand back or tread very lightly when the Bulls and Bears are screaming at each other like they are today, (and have been doing a lot recently).

Market Bounces but Holds Its Breath

The economic news pre-market is mostly sour, and yet stock market futures are up anyway. Durable Orders missed expectations, and Weekly Jobless Claims were worse than expected. Bond Manager Bill Gross said he expects the unemployment rate to climb to 7% (which is not good, but obviously much better than the rest of the world).

NKE beat earnings expectations, and GE lowered earnings guidance but had its AAA rating re-affirmed by Standard & Poors. The corporate news is so so this morning, but not too bad.

It looks like the market wants to at least try for a technical bounce after the two heavy days of selling (following two huge days of buying.....) and the Deliberation Day yesterday. The market is at somewhat of a short term tipping point today. If it can push up, the the Bulls may win a short term 1-3 day type of technical bounce. If the Bears push the market down substantially below yesterday's lows then they may win a round trip back to last week's lows. We shall see who wins.....

7:00 pm MT: Market Wrap: The market bounced today as traders anticipate the government bailout is getting closer to being passed. I was looking at today as a short term tipping point, and after yesterday's Deliberation pattern I was looking for it to tip up, which it did.

I nibbled a few calls on SPY and DIA and sold the rest of my TRA puts for a profit. I am focused on a few Financial stocks and the Energy patch.

This evening WM was officially acquired by JPM, well.....at least its deposits were acquired. WM is the latest Financial company to refuse a better offer ($4.00 per share in March by JPM) only to see their pride humbled by a total implosion of the company.

Also, RIMM guided down after earnings and is down very sharply after-hours.

So we will see some major cross-currents tomorrow. RIMM will drag down Wireless and the Naz while the bailout and possibly the buyout of WM may bolster Financials and the SPX. In addition, if the bailout goes through, the Dollar will probably drop, which will probably push up oil, Energy, Commodity, and Gold stocks, which will probably push down Retail stocks. Like I said, we will see some major cross-currents tomorrow.....

Here is an interesting Bullish list for tomorrow and perhaps Monday - Tuesday:

Financials: JPM, ACE, EEM, KBE, BBT

Coal: MEE, ANR

Gold: GG, AEM, ABX

Energy: HES, XTO, DVN, ECA, BHI, NOV, COP, SII, APA, (APC, CVX, XOM, PXD)

Also Note: PEP, WY, RYL, TOL

Market Selling Slows Down

Are we in the eye of the storm or has the storm passed? That's the question on traders minds today as the Senate continues to kick back and forth over the $700b bailout proposal. Warren Buffet gave the market some support as he made a huge investment - through bonds and warrants - in Goldman Sachs. Traders may take a "glass is half full" approach this morning, at least for awhile.

The major indexes are at a point that any substantial drop today probably means a round trip back to last week's lows. As per this year, I'm being selective and using good risk management. And as per the past week, I'm playing very short swings and not holding anything overnight.

7:40 am MT: I’ve been going up and down my watchlists looking for ideas. I just don’t see much that makes me excited, and if I do like something – the spreads are too wide. I did find one trade on STI calls, which is actually trading in .10 - .30 cent spreads. I almost didn’t believe my eyes, since so many other Financials and Regional Banks are still trading really wide spreads. I did a little nibbler in case this is all an illusion.

8:00 am MT: I nibbled on some AEM calls. It looks like the market is still wringing its hands and running around in a residual panic from the past several days. I probably won’t do very much today, so I’m keeping it focused.

2:00 pm MT: Trading Wrap: I nibbled lightly on STI and BBT calls. Since I’m cherry picking the position, I’m willing to hold overnight. I also went heavier into TRA puts to take some advantage of the Energy and Commodity stock consolidation today. I sold most of the TRA puts and all of the AEM calls during the day. I added another $272 to the “paper” money account today. Nothing major, but I’m still chugging along this week.

4:00 pm MT: Market Wrap: The market appears to be slowing down the selling in a variation of a Deliberation candlestick pattern. It helped that oil consolidated down another couple of dollars today. I think everyone is waiting to see how the $700b bailout shapes up, and if it will ever get off the launching pad. There is still a lot of hand wringing on Wall Street, and even the bailout will not completely alleviate the stomach churning going on with traders and financial institutions. If we do get positive news or a bounce in the morning, I will look at SPY and DIA as possible quick, short swing call plays. I’m also diddling around with the two Regional Bank calls (STI and BBT). I still don’t have any interest in taking large positions, or holding full positions overnight on directional trades. This is still a day to day market.

One note: due to a serious family issue I won’t be putting out a huge amount of postings the next few days. I will hit the core issues and post the “paper” trades that I do, but I need to keep things to a minimum for a few days. I will be off work tomorrow, but I will be on VC tomorrow evening.

Market Dumps Again as some Senators Bicker

Pre-market futures are flat ahead of testimony by Treasury Secretary Paulson, Fed Chairman Bernanke, and SEC Chairman Cox to the Senate Banking Committee. That will be an interesting "state of the financial markets" meeting.....

Financial sector stocks will continue to be volatile as Regional Banks become the latest target of negative chatter, although the negative could become positive if some of the Regionals get acquired for a fair price. Also, the credit-default swaps market may be getting close to finally becoming a regulated market, which is a good idea since it is estimated to be a $43 trillion - $60 trillion dollar market worldwide.....

The drumbeat goes on today. If the markets drop much more than yesterday's low then we may see too much chart destruction to hold the Intermediate Term Neutral posture. Or if the market goes too much lower than it is now, it's at least headed for a test of the previous lows. We shall see.....

8:55 am MT: I nibbled on AEM calls and KMB calls. I wanted to pick up some WY calls as well, but the spreads were too wide. The spreads are still too wide on most Financial stocks and the market continues to consolidate the big Thursday – Friday moves on Monday – Tuesday.

9:15 am MT: I dumped the AEM calls for a small .10 cent gain, and I dumped the KMB calls at breakeven. I just don’t feel like fiddling with stuff that gets fussy. Fussy is not what I like in a violent and spastic market. Hank and Benny are talking to the Senate Banking Committee, which is supposed to give the final ok on the $700b bailout. Unfortunately, (and who in the universe couldn’t see this coming), certain politicians are stonewalling because they either want to attach their own projects to the bailout (greed) or they want the economy to continue to fail until after the elections (power). So this little get-together is going to last for awhile.....

10:00 am MT: Energy and Commodity stocks are seeing some profit taking and some are rolling over. This isn’t surprising after the huge two day jump in oil prices. I like how some of the stocks are rolling over in Chemicals (TRA, MOS, CF) and Coal (WLT, BTU). I’ll look at those for puts later in the day.

1:00 pm MT: I took awhile, but the Chemicals and Coals bounced enough for me to nibble on puts for TRA and BTU.

1:40 pm MT: I took profits on the two put trades. BTU was a .29 cent profit or 4% gain and TRA was a .32 cent profit or 6.5% gain. I pulled in another $659.00 in the “paper” money account today. I would normally hold some of the positions overnight, but this ain’t “normally” times.....

For now, I’m content to nibble around with smaller risk type trades and keep pulling in nice returns on very short swings. I’ve picked up over $1500.00 the first two days this week and over $5000.00 in the past week basically just chugging along here and there. I don’t want to get too aggressive right now, I just want to keep grabbing some green.

1:55 pm MT: With volatility so high I decided to price a nice, wide-wing Iron Condor on the SPY. The spreads are all over the place between the bid and ask, but if they close down to .02 - .03 cent spreads, which is more normal, then the IC has some nice potential. I am going to ask for .30 cents for the October 108/109 130/131, which is a potential 43% return for 23 days of time. The strikes are above and below long term resistance and support. It may be that the wide spread environment makes the fill unrealistic, but I will float the IC in the morning just to see if it gets filled. The biggest risk is to the downside, so as always, to reduce risk I keep it to one a point spread between strikes.

3:00 pm MT: Market Wrap: The stock market was up sharply on Thursday and Friday and down sharply on Monday and Tuesday. The major indexes haven’t made a full round trip, so the net net is that the market is still holding above the recent lows. I’m still Intermediate Term Neutral, but it’s a wild, violent, newsy, cataclysmic Intermediate Term Neutral.

There’s not much to add to what I’ve already yapped about earlier today. And until the Senate Banking Committee makes a decision, I don’t expect any type of bullish bounce – if we get one at all…..I don’t want to throw a lot of analysis out on a day like this, it actually makes things more confusing. Just call it a big, hairy consolidation day, and a giant wait and see what the government does next. It’s too bad that big Financial Institutions can’t take care of their own problems without government help, but it is what it is right now, so we wait on the Senate Banking Committee and the politicking of our elected officials.....

Market Dumps and Oil Rebounds

The Financial News is still rolling in, some new, some several days old. Treasury Secretary Paulson is still pursuing the government plan to spend up to $700b to buy bad mortgage-related debt from financial institutions. Also, the Fed approved a conversion of GS and MS to banks from brokers, and that my friends, is the end of an era on Wall Street. So we'll probably hear some follow up with more details, and how it all came to this, but there it is, no more big securities firms on Wall Street.

Oil is continuing the bounce all the way into the $107's this morning. Many Energy and Commodity stocks may gap up, so I'll watch to see what the spreads are like and if any of those are playable for calls today - if the gap isn't too big.

Stock market futures are down, which means that we could be starting a 1-3 day consolidation off the huge moves on Thursday and Friday. The consolidation was to be expected, so that's not an issue. What we need to see is an orderly consolidation and not a sell-off. We shall see.....

8:00 am MT: The market opened down in “consolidation mode” which I expected. Energy, Gold and Commodity stocks are on the move to the upside, which I also expected. The market is probably going to churn and gyrate and push and shove today as Big Money gets a handle on whether uncertainty has diminished or if we’re just seeing a rearranging of the deck chairs on the Titanic.

Energy and Commodity stocks are catching a bid from a bullish halo effect in Financials, but they are also catching a bid from the consolidation in the Dollar on Friday and today. The Energy play may be over in the next day or two, so I’m just looking for a possible short swing or intra-day swing.

8:15 am MT: It’s tough to find any spreads under .30 - .40 cents out there. I did manage to find a couple in Energy and Gold. I nibbled on some OXY calls.

8:45 am MT: I nibbled on some AEM calls and added a little to the OXY calls. If we get a bounce in the next hour or so I will look to sell the next intra-day swing.

9:00 am MT: I sold the OXY calls for a small .05 cent gain. I’m not sure if I’ll keep futzing around with this stuff today, it may not be worth it. I don’t think there’s much left in the current Energy swing, so I’m probably trying to squeeze something out of nothing. I like the Gold play a lot better. Today is shaping up just how I thought, there really isn’t much to do but wait for the news hysteria to play itself out.....

10:30 am MT: I continued to add to the AEM calls all through the Bull Flag intra-day. It’s starting to bounce now, so I picked up a little more to finish out the position.

11:25 am MT: I started the process of profit taking on the AEM calls.

11:35 am MT: I’ve locked in profits on half of my AEM calls.

12:15 pm MT: I sold the last of the AEM calls for a total trade of a $1.01 profit or 14.5% gain. So I made $850 on my “paper” trades today and I’m probably done. I need to see the option spreads start to come down on a whole lot more options in order to step back in with heavier trading.

3:00 pm MT: Market Wrap: The good news is that option spreads started narrowing towards the end of the day. It may mean that option trading will get back to normal, although normal is a relative term these days.....The bad news is that the Dow finished down 372 points and the market had a deep consolidation off of Friday’s move. The major indexes need to be a little more orderly in the next couple of days or this is probably going south again.

The huge $700b bailout proposal by the U.S. Treasury and the price it will cost taxpayers is crushing the Dollar. That, in large part, led to a MASSIVE short-covering rally in the October Oil Futures contracts - spiking those futures as high as $130 per barrel as shorts screamed to cover before they expired. The November contracts now become the front month futures, and that means the price of oil traded to about $108 - $109 today. Today was the biggest one-day price gain for oil in 10 years. The violent moves across all the major markets – stocks, oil, dollar, etc. continues to create a tremendous amount of short term turmoil.

Those of you who have followed me since January know that I have been just pounding the table for the government and financial institutions to focus on the 30-year Mortgage rate and get it down to 5.00% by increasing stability on the long end of the yield curve. And you also know that I called out financial institutions to sacrifice some profits and re-work ARM's and "at risk" mortgages to low, fixed-rate loans rather than risk losing the loan altogether AND the speculative CDO's on those loans AND the credit default swaps on those loans AND possibly driving their own companies into bankruptcy AND possibly driving the Financial Sector into a massive implosion AND possibly driving the economy into a depression....unfortunately.....most financial institutions decided to try and stay as competitive as possible (i.e. greedy as possible) and stubbornly refused to do budge an inch on their own corporate profits. It would have been better to lose some money rather than the whole company.....Well, Lehman is a classic example of a financial institution that refused to budge, refused to take a financial hit and eventually a lower buyout price, and stubbornly tried to keep behaving like their assets were worth more than they were.....And Lehman is GONE, G-O-N-E, GONE! Way too many financial institutions behaved this way ALL YEAR.

Now we see that the U.S. Treasury is going to go after those same "at risk" type mortgages that I have been YAPPING HARD about all year. The U.S. Treasury is intervening because the financial institutions (and this means even financial institutions outside the U.S.) have insisted on staying greedy and competitive to the point of massive, world-wide financial failure. They refuse to do anything on their own part to alleviate the huge risk in the "at risk" mortgages. It's jut ASTONISHING to me to see these principle officers and CEO's behaving with such competitive self-interest when the future of the global financial markets is at stake. Just AMAZING to watch. I realize that political corruption started the whole mess and then it moved into corporate corruption.....But now it appears that most financial institutions painted themselves so far into a corner that only a Hank Paulson (former CEO of Goldman Sachs and current Secretary of the Treasury) and Ben Bernanke (Federal Reserve Chairman) led bailout can stave off the absolutely CATASTROPHIC failure of the financial markets that we would otherwise be headed for. Hank and Benny are doing exactly the right thing given the circumstances. I don't want the government running insurance or mortgages for longer than a year or two at most, but for now, they did what they had to do in order to stave off economic Armegeddon.

In addition to the Financial sector news, including the end of investment banking on Wall Street, there were several major repurchase announcements. MSFT, HPQ, and NKE all announced big share buy-back programs. I like the fact that some big name companies aren't afraid to buy stock, that makes me and the rest of the market breath a little easier, not alot.....but at least a little.....The market is still very news, and still very volatile, and I’m still not holding directional trades overnight.....

Weekend Update

The stock market indexes had the biggest two day move from low to high in six years. The underlying fundamentals in the market really haven't changed with the huge intervention last week. However, the first key step to halting the bleeding was taken by the government and major financial institutions.

The ban on short-selling has been a key issue for market makers, who often use shorting to hedge risk on their option inventory. That's why we saw such exploded spreads on options on Friday. Market makers were hedging risk by dramatically widening spreads instead of being able to short stocks. The SEC will probably have to exempt market makers, to some degree, from the short selling rule in order for the options market to continue in an orderly manner, or to continue at all for that matter.

I still haven't seen any news on a short selling exemption for the options market makers, so there's no point in getting too cute about what to expect tomorrow. It may be that tomorrow is simply a day that we won't want to trade options. I'm approaching it that way.....

My market posture is Intermediate Term Neutral and Short Term Bullish. However, we are still in a violent, cataclysmic type of market. So keep directional trades to very short swings for the next few days, just like the end of last week. And watch out for the wide spreads. I will probably be just sitting on my hands and watching how things shake out tomorrow before I look for my next trading idea.

Shorts Are On the Run Again

Pre-market futures are up about as much as I've ever seen them.....The market is set for a huge gap up at the open.

The SEC is temporarily banning short selling on certain Financial stocks. Also, the Treasury and the Fed will introduce a $50b plan to help stabilize money market funds with loans to banks.

The newsy Financial Crisis Intervention drumbeat continues today. I expect the shorts to be absolutely screaming this morning. Volatility is also relatively high.

I will sell much of my DIA, SPY, STI, COF, and PRU calls into the big gap at the open. But I will look to pick those positions right back up if we get a pullback and it holds. If you are entering new positions right at the open - in case the market takes off and doesn't look back, take very small positions at first that you can add to if the market pulls back. That way you can diversify against the expected volatility and potentially wild price action this morning.

I speculate that the shorts could be on the run again for much of the day, but I think we will probably have a few "settling down" points throughout the day as well. We shall see.....

Market Roars Back on Short Covering

The mornings key headlines are mostly negative, but the pre-market futures are up anyway. That will happen after the Naz drops over 100 points the day before.....

In Financial sector news: WM put themselves up for sale and MS is attempting to merge with another bank.....The world's largest central banks, along with the Fed, said they will pump $247b into the financial system in a coordinated worldwide intervention, so this looks like the first strong attempt by the Financial Institutions themselves to "Hold the Line." The intervention by the banks is what gave the pre-market futures a big lift.

In Employment news: Weekly Jobless Claims missed expectations by 15k, which continues the trend of bleeding off jobs. Expect the trend to continue as the Financial sector continues to atrophy companies.

In Oil news: The price per barrel of Oil has jumped back over $100, which is exactly what we don't want. However, Oil was due for at least some sort of relief bounce after all the selling recently. The current support zone is $90 - $100, so this is the area I want to see the price of Oil stay trapped for a while. We don't want to see an uptrend anytime soon.

The market is set to bounce this morning on the first major intervention by the Financial Institutions themselves. The liquidity they are pumping into the financial system is probably made possible, in part, because the government chose to keep AIG solvent rather than let it go under. One of the key areas of business for AIG is insuring financial assets like mortgage related assets, debt notes, and bank portfolios. If AIG had gone under, then all the insurance for bank portfolios would have gone bye-bye, and banks worldwide (and especially here in the U.S.) would have been required to raise their cash reserves in order to meet minimum reserve requirements. Instead, the banks now are able to pump more cash into the system to start the intervention process. We'll see if they take some other serious measures - and do it without any government money.....there's still much to do.....

I'm not looking for the bounce to last unless I see a significant chart sign that the trend has changed. We haven't had a catastrophic selling blowoff yet, which we typically see before the end of historically bad financial conditions in a major market sector (like the Tech Wreck). However, if the trend changes it changes, so I'm open minded.....

As for this morning, I'm not looking to buy puts unless I see a very clean intra-day signal. Otherwise, I may sit on my hands for at least half the day.

3:00 pm MT: Market Wrap: This was a wild, wild day in the markets. The sheer volume of news and trading activity in the U.S. and world markets was off the charts. I’m going to encapsulate the enormous amount of information in to a logical through-line of recent history and then project where we still might go in the markets near term.

But first.....Here’s a quick recap of my trades on the day: I bought and sold SPY and DIA calls for 12.5% gains, and I bought and sold IWM calls for an 11% gain. I made about $1,650 on the three trades. I also bought PRU, COF, and STI calls, which I’m holding overnight. In addition, I bought SPY and DIA calls again that I’m holding overnight. If we get a bit of follow through tomorrow, then I’ll sell ahead of the weekend and see what happens next.

Now for the Market Wrap.....

Remember yesterday I reported this news blurb? {Here is the report from Briefing: “Short-sellers will now have to deliver securities by the close of business on the settlement date. The SEC eliminated an option market-maker exception for the close-out agreement. In addition, short-sellers who deceive market participants are now committing a fraud.” The rule is designed to force traders and market makers to actually borrow shares used in short sales, or in other words to prohibit naked short selling. It also makes it a securities fraud when sellers deceive brokers about delivering borrowed shares to buyers.}

And remember the day before I posted that Big Financial institutions needed to stand up, stand together, and take creative, gutsy, dramatic steps to “hold the line” and stop looking for a taxpayer bailout? And they need to take the steps, if for no other reason, than the preservation of their own livelihood and the financial markets?

And remember how I’ve yapped over and over again this year about the emotional, frenetic, and greedy trading behavior of Hot Dog Traders acting as Hedge Fund Managers? And how many of those traders are marginally skilled at best and incompetent at worst? And how they often DON’T see the big picture and how their collective trading behavior is affecting the markets? And how HUGE the Hedge Fund Industry has gotten in the past 10 years, growing from several billion dollars to several TRILLION dollars?!!

Well, let me delineate the past several days into what I think REALLY happened, and how it affected the market today.

First: The government intervention and the Fed’s emergency measures with interest rates, loans, bailouts, and takeovers is a known quantity with traders worldwide. We’ve seen what the Fed (and government) has done, what it is doing, and what it’s probably going to keep doing. We also know, approximately, what their resources are and how much they are willing to allocate those resources. So at this point, what the Fed and the government have done and can do is somewhat of a constant for the markets, it’s already factored in.

So here’s what’s changed in the past several days, and I believe that this has been a coordinated plan between the Fed and the major Financial Institutions of the world.

Point 1: Hedge Funds are the key short sellers in the market, and the Hedge Fund Industry is huge and unregulated. There are many Hedge Fund managers that are incompetent or greedy and they are willing to short stocks into oblivion if they think they can make a fast buck.

Point 2: The Fed stared down the market and refused to pander to Big Financial Institutions by cutting rates. The Fed basically sent the message that they will continue to work with them, but financial institutions need to chip in and start fixing their own problems.

Point 3: The SEC announces that they will enforce the no naked short selling rule, which is selling to open (or shorting) stock that a trader has NOT actually borrowed. In other words, if you want to short – you HAVE TO BORROW the shares. This has always been the rule, but the SEC is threatening to prosecute violators now.

Point 4: The Fed and the government orchestrate a bailout/takeover of AIG. A big part of AIG’s business is to insure banking reserves or bank portfolios. By avoiding bankruptcy, the insurance that so many big banks worldwide have on their own portfolios stays intact. This prevents the banks from having to dramatically raise cash reserve requirements, which would create a massive, worldwide cash crunch crisis. It also give the banks some flexibility with their own current cash reserves.

Point 5: The Fed and Central Banks in Europe and Asia pumped hundreds of billions of dollars into the worldwide financial systems, making cash available to floundering financial companies.

Point 6: The UK bans short selling on any Financial stocks for the rest of the year. This starts the panic among the Hedge Funds today as they anticipate that short selling restrictions will spill over to the U.S. Right on cue, the state of New York and the SEC start grumbling out rumors of looking at halting any new short selling.

Point 7: The three largest U.S. pension funds announce that they will no longer make their stock holding available to short sellers, especially in financial stocks. These are multi-TRILLION dollar funds that are walking away from the interest that they might gain from loaning massive amounts of stock shares for short selling.

There you have it. Hedge Funds were dramatically exacerbating the selling in Financials trying to make wild (and I would say that in the catastrophic current environment – irresponsible) profits. Banks were in danger of losing liquidity and creating a worldwide cash crunch crisis. And the Fed was running out of ammo and sending the message to the major financial institutions of the U.S. and the world to step up and start helping to fix the mess. So the Fed saves AIG, which saves the banks a ton of cash, and then in a coordinated effort with other central banks pumps a bunch more cash into the worldwide financial system. Then the SEC, government, and the UK government put the whammy on naked short selling and any new short selling in financials. Then the biggest pension funds in the U.S. disallow any further borrowing of shares for short sellers, and encourage up to 60 other big fund managers to do the same.

They squeezed the eyeballs out of the shorts in Financials today. And it showed with the HUGE moves in Financial stocks. The Dow, SPX, and the Naz finished with big Hammers today on big volume. Tomorrow will probably see some follow through. ESPECIALLY since the news just hit late tonight that the SEC may indeed follow the example of the UK regulatory body and ban all short selling for a period of time. It remains to be seen how long the ban would last, and how broad the restrictions will be, but the Shorts (meaning the Hedge Funds) will probably be screaming for cover again tomorrow morning. This whole giant short squeeze today might not last too long, and it might flame out tomorrow, especially since the fundamentals in Financials haven’t changed, and because it has been such a huge short term move. But any short term pullbacks will probably be met with more short covering for awhile. We will probably continue to see a lot of volatility in the markets for awhile. Probably not like today, but enough to make me want to keep my trades short and quick as always.

So Far, So Bad.....

The Fed is throwing an $85b lifeline loan to AIG to prevent the insurance giant from going bankrupt. The Fed is cherry picking a little bit, deciding who lives and and who dies, but this is probably exactly what they have to do in order to stabilize the Financial sector mess just enough to prevent a collapse. In other Financial sector news (are we all getting tired of that line or what?), MS beat earnings expectations but is still trading down pre-market. It's still too early to tell whether traders like or dislike the earnings report.

I'm looking for the market to hold yesterday's bounce and build off it a little today. It may be that this recent wave of catastrophic news in Financials is beginning to attenuate, we shall see.....For now, as usual, tiptoe through the market minefield, don't go running around with a blindfold. I'm still taking small positions and nibbling here and there. It's still good money, but my risk management is critical to keeping me healthy right now.

3:00 pm MT: Market Wrap: I only nibbled very lightly on a few trades today. I picked up calls on KSS, KMB, STI, and COF. Before the morning was over I stopped all but KMB. The losses were only a few hundred dollars, but that wasn’t the issue for me. I wanted calls, I wanted Big Financial Institutions to put a bid under the market. But it doesn’t look like they are willing to come out of “every man for himself” mode and start thinking of the long-term health and survivability of the financial markets.

The Naz broke key support and had a huge dump today. The next support is still another 100 points below. I may be playing puts on the Q’s the rest of the week. The Dow and the SPX are clinging to the edge of the cliff by their toenails and very close to taking another big dump themselves. The chart damage today was close to catastrophic. It’s just so incredibly unfortunate to watch the self-interest, fear and greed rule the day. It is what it is.....

Resistance for the SPX is now 1,170 – 1,175 with another key resistance at 1,200. Resistance for the Dow is now 10,700 – 10,750 with another key resistance at around 10,900 – 11,100. Resistance for the Naz is now 2,150 – 2,160 with another key resistance at 2,200.

I could do a lot of re-capping of the news, but it’s all the same old same old in Financials. One new interesting tidbit is the SEC action against short-selling of stocks. Here is the report from Briefing: “Short-sellers will now have to deliver securities by the close of business on the settlement date. The SEC eliminated an option market-maker exception for the close-out agreement. In addition, short-sellers who deceive market participants are now committing a fraud.” The rule is designed to force traders and market makers to actually borrow shares used in short sales, or in other words to prohibit naked short selling. It also makes it a securities fraud when sellers deceive brokers about delivering borrowed shares to buyers. You know what I think? I think that all that yapping I’ve done this year about Hot Dog Hedge Fund managers and their greed, and their ignorance of the bigger picture is all coming home to roost. Remember, Hedgies are the biggest short sellers in the market, and Hedge Funds can be found everywhere from private individuals to Banks and Brokers trading departments. We’ve had a huge, huge explosion of Hedge Funds in the past 10 years as even major Financial Institutions and Major Funds of a variety of sorts all scrambled to take more advantage of shorting and making money on a dropping market. Well.....here we are.....I’m not one for too much government intervention, but this is a responsible rule designed to keep an orderly market and eliminate fraud, manipulation, and to an extent, greed. We have the best regulatory oversight in the world, and that’s critical for having confidence in the Financial markets.

As for tomorrow, and the rest of September, it’s hard to envision a scenario for wanting to get loaded up on calls. If the Big Financial Institutions won’t step in and hold the line and start making some amends for their greed and overspeculation, then the prevailing trend will stay down. And it will stay down to the point of some sort of catastrophic climax. The main thing that I’m concerned about with the collapsing of the market now versus the year 2000 – 2001 is that a Tech stock that was trading at $450.00 but never had positive earnings and goes bankrupt means a few lost jobs. But a Bank that was trading at $45.00 and goes bankrupt means a whole bunch of people lose their life’s savings. I don’t even like writing stuff like that. It really bothers me, but it needed to be said. This situation in the markets is at a critical, critical point. It needs to be corrected, and like I stated yesterday, it needs to start with the Big Money, the Big Financial Institutions that created a good portion of the mess in the first place. The government played a huge role in the mess with the irresponsible and politically motivated loosening of lending standards at Fannie and Freddie a number of years ago, but the government is getting to the point of being maxed out on what it can do. We really need the Financial Institutions to step up to the plate, and they SHOULD step up to the plate if for no other reason than the survivability of their own business, their own jobs and wealth and livelihood. Right now is the time for Banks and other Financial Institutions to get together and to get creative and get gutsy. Whatever it takes.....close to zero profit margins on all long term loans for awhile, freezing the 30-year Mortgage at 4.9%, working together instead of cutting each others throats, whatever it takes!

I will summarize all of this by saying that I will probably looking at puts. If you are a Retail trader, a little guy or gal, and you want to do anything right now, you have to favor puts. I certainly hope that the Big Financial Institutions make me wrong.....I don’t mind losing a little on puts if it means that I will be able to make a lot more money trading calls in the long run. But as always, I will focus on profitable trading, and that means puts as long as the trend is down.

Note: Here is an answer to a comment question on the VIX:

We're not even close to an all-time high on the VIX. "When it's high it's time to buy" (before the 5-year bull market) meant readings over 50. The Tech Wreck Bear Market ended after a VIX reading of 57, the VIX is currently at 36. We still haven't had a catastrophic blowoff.....

Market Bounces Off Long Term Support

AIG is down 58% pre-market after having its credit rating donwgraded at Standard and Poor's and Fitch. WM is suffering the same pains. The Financial sector turmoils appear to be reaching a near-term crescendo with all the bad news. The catastrophic, self-inflicted damage may keep the bleeding in Financials going for some time, so I expect more bad news to come flowing into the markets, but the current tidal wave may see its peak with the Fed. Goldman Sachs still has earnings to report this morning, so the news will keep on rolling in today.

In addition, we will get CPI, which I expect to show a one-month deflationary reading after the big drop in oil prices recently. Also, HPQ is cutting 24.6k jobs and DELL is warning of further softening in global end-user demand. I will use the negative tone early in the day to scale out of the last of my puts and then watch for the next signals. It may be that we go quiet ahead of the Fed, but I expect a bounce back on speculation of a rate cut, especially if we drop a bit more right out of the gate. The Dow could jump 100 - 200 point mid-day and still not be able to undue half the damage done by yesterday and this morning.

7:31 am MT: I sold the last of the DIA puts right into the big gap at the open for the max gain of 2.20 on my calls just before the bounce I was warning of. The total trade was a 1.45 profit or 34.5% gain.

8:00 am MT: GS beat earnings by 10% but the stock got caught up in the early morning carnage and gapped down before bouncing back. BBY missed earnings and gapped down sharply. CPI met expectations, which was a drop of -0.1%. That met my expectation of a deflationary reading. AIG is now a penny stock, last week it was a $25.00 stock.....

The Fed Funds Futures are now pricing in a 100% chance of a 25bp rate cut today. In addition, they are pricing in a 28% chance of a 50bp cut. I speculated that the risk of a rate cut today will cause the shorts to cover a bit this morning, which has already happened to an extent with the gap and bounce.

8:30 am MT: Oil has had a big gap down along with the market. If the market comes back, it will probably be aided, in part, if Oil stays down in the low $90’s. Oil may be oversold short term, and it may bounce, but if it stays in between $90 - $100 for awhile, it will really help the economy.

12:15 pm MT: I’ve never been prouder of Benny and the Feds than I am right now. GOOD FOR THEM!!! They stared the market right in the eye and said “you (meaning speculators on all levels all the way up to the biggest Financial Institutions) got yourselves into this mess, and if you want to keep enjoying speculating in the Financial markets for the rest of your lives, then you can darn well get yourselves BACK OUT OF THIS MESS!” Think about it for a moment…..There are millions of people in the Financial markets that make a living (and for many a spectacular living) speculating every day in the major markets. Do you think they just want to give it up and go dig ditches for the rest of their lives? Absolutely not!!! This is exactly what the Fed (and the government) needed to do. They needed to stare down the market and say “look folks, we’ve already done a lot for you, in fact, we’ve done an awful lot for you, and we’ve hit the limit, you need to get off your rosy red cheeks and start doing something for yourself, because we’re done bailing you out.” “Start figuring it out, start fixing your own problems, we’ve done all that we can, and all that we should, now use all your ingenuity, savvy, guts, and determination and get the rest of it done yourselves."

See, the principle here is that sometimes you reach out a hand to lift someone up when they need it (even when they caused the problems themselves). But you can’t do it every time or they become dependent on you, and you take on the role of enabler or crutch. The best way to help someone help themselves, is to lift them up from time to time, empower them, but then let them have an opportunity to take care of themselves as well. Urge them to action, encourage them, and above all, tell them that they can do it – that they can succeed on their own. I like to say that you teach someone the tools, give them the support and example from time to time, and then give them something to live up to, motivate them to action. Then it’s up to them to live up to their potential.

You will see some yapping heads and elevator analysts claim that the reason for the bounce (after the big initial drop on the “no rate cut” news) was either the news that the Fed is reconsidering its stance on helping AIG or that Barclays is indeed going to buy LEH. I don’t believe it for a moment. There just isn’t enough fundamental strength in Financials or the market to make a huge bounce back on huge volume based solely on speculation of AIG or LEH. That’s just bad trading, in fact it’s idiotic trading. Smart Money doesn’t make big moves in the market based on two stocks that are still hanging in the balance. This was Big Money saying, “look, it’s up to us now, we either support this market or we all go home, dig a hole in the ground and live in a cave for the rest of our lives.”

I also speculate that Smart Money knows that the Fed refused to put an artificial bid under Oil. Now that’s a HUGE positive. If the Fed had artificially stimulated short term inflation by lowering rates today by 25 or 50 points, then Oil would eventually catch a bid and.....back up we go to $4.25 a gallon. As it is, it looks like the average American is saving about .50 cents a gallon, and the recent drop in oil from the $115 area to the low $90’s could drop gas another .50 cents a gallon. That means the average American is probably saving at least $50 a month right now, and it could be well over $100 a month if the price of gas drops another .50 cents. That’s a huge amount of extra discretionary spending that could prop up the economy and at least keep us fundamentally sound.

1:30 pm MT: I nibbled on STI and COF calls. I wanted to do a little more, but I’m going to see what happens the next several days before I get too overboard with calls. But I think that Big Money may be stepping up and rising a little to the Fed’s challenge (I know the Fed never said anything out loud to the market, but actions speak louder than words).

2:00 pm MT: Market Wrap: The Dow rallied 351 points off the low this morning and eventually finished up 141 points on the day. Right after the Fed announcement of no rate cut the Dow (and the market) took a big dump. The Dow dropped 158 points within 7 minutes after the Fed. But somewhere in there the backbone of the market finally kicked in as professional traders around the United States realized that if it the market was going to show some toughness, then it was up to the guy or gal staring at them in the mirror. From there, the Dow rallied 311 points in the next 60 minutes. We may not be out of the woods, and it sure would help to have a change in the supply equation of Oil, but this was a very resilient day with HUGE volume.

I like the guts that Big Money is showing right now, we’ll see if it holds up. We may not make much headway in the next several weeks, but the floor for the market was established right here right now, today. It will be important for the market to build a strong base off the move today.

By the way, guess where the market drew the line in the sand today? Hmmmm? Any guesses? Who has been following the trend channel I have posted over and over again on the Dow and the SPX? I’ve posted the channel lines numerous times this year if you look at past entries, like on the July 26th post. I’ve had the same channel lines for months, and as you can see, I didn’t have to move one tiny inch to get the support point on the SPX. And the Dow was just about as close to dead-on as the SPX. In addition, the Naz did a nice job of holding a horizontal support in the 2,150 area that it has tested twice previously this year, and that I posted also on July 26th.

Here is the long term chart of the SPX showing the channel I first drew months ago. The SPX pinged off the support line almost to the penny:
(click on image to enlarge)


Here is the long term chart of the Dow showing the channel I first drew months ago. The Dow bounced very close to the support line of the channel:
(click on image to enlarge)


Here is the long term chart of the Naz showing the horizontal support I first drew months ago. The Naz bounced right where it was supposed to hold. This is a critical support zone for the Naz, a break below the zone and it's probably headed for 2,000:
(click on image to enlarge)

Now, as I said above, I think today is a nice start, and I think Big Money/Big Institutions showed the guts they needed to today instead of always looking to the Fed or the government to bail them out. But, the huge X-factor in all of this is the price of Oil. This whole year has been about two things: Real-Estate and Oil.

Real Estate and all the attendant problems that big institutions and individuals caused themselves will only be cured by time and low interest rates on the LONG end of the Yield Curve (not the short end that the Fed refused to manipulate today - good for them! Have I said that already a few times!).

Oil can be cured immediately. And here is the solution - drill for more. Now, I'm not trying to make a political point, I'm simply describing the immediate solution to the price crisis. We all want alternative energy to be viable, but until it is, the only way to keep prices down is to increase supply. Another point, many people will say that drilling for more oil will not change supply for 3-5 years - and here's my answer: they don't know the first thing about speculating and I do. In fact, I would like to think my track record, live, right in front of everyone this year has proven that I know a whole lot about speculating. And the simple fact of the matter is this, we can keep bullish speculation OUT OF OIL if we even demonstrate that we are beginning to start the process of drilling for more oil. That alone will keep the price of oil under $100 per barrel. In fact, speculators will eventually SHORT OIL and push the price even further down (much to the chagrin of OPEC, Russia, and Venezuala). The key negative to drilling for more oil right away will be that research for alternative energy might slow down. However, savvy corportions and intelligent scientist will realize, especially with the huge issues from the current price crisis, that even in the future we are just one supply shock away from another mega price spike. I would speculate that that issue alone would keep many people researching alternative energy for as long as it takes.

Bad News Financials Crunch the Market

The good news was that MER appears to be getting a premium for its sale to Bank of America. The bad news is that LEH is filing for bankruptcy and the stock is trading down to .36 cents, and AIG is trying to raise cash to survive. We already knew the Financial sector was in bad shape, but the AIG news casts a new level of doubt on the survivability of many Financial companies. Today could end up being very ugly, at least in the morning.

There is some good news out there.....Oil is down to the mid $95's, which is the bottom end of my support zone. It will be interesting to see if oil holds the $90 area or not. Gold is up as a flight to safety this morning.

I don't want to be long (in calls) anything right now. If I do anything today, it will probably be to play puts on the DIA, SPY, and perhaps the Q's and IWM. I will watch for an opportunity early in the day, but remember that oil dropping in price eventually will give the market a boost. However, the news is so ugly in Financials right now that we could see alot of fear selling, and Energy and Commodity stock selling will probably only add to the bearishness this morning. Strap on your seatbelt, I told you on the last post to expect some early week volatility, and here we go.....

One other note, don't feel compelled to trade in this kind of volatility unless you get some nice buy signals intra-day. Otherwise, you may want to stand back.....

7:31 am MT: I cleared out the STI calls for a .64 cent loss at the open. That was my only directional trade left over from last week. I want to be flat while I watch all this play out today.

8:30 am MT: The market is bouncing off the big gap down. This is the first test to see if the day will roll over and dump back down or it will stabilize.

9:30 am MT: The market did crack back down and test near the lows of the first hour. I doubt that the market will be able to mount a serious comeback today with the weight of so many sectors selling off on fading fundamentals. Even Energy and Commodities are selling hard, as I anticipated.

12:00 pm MT: I nibble on puts for ACI, NOV, and MUR. In addition, I nibbled on DIA and SPY puts, but I kept those positions very small because of the crunching back and forth price action today.

1:55 pm MT: I locked and walked on all the puts from today: ACI was a .40 cent profit or 12% gain. NOV was a 1.00 profit or 17.5% gain. MUR was a .70 cent profit or 18.5% gain. SPY was a .79 cent profit or 18% gain. And DIA is a .70 cent profit or 17% gain so far. I kept a little of the DIA puts and everything else is cleared out.

3:00 pm MT: Market Wrap: Well that was that.....The Dow finished at the lows of the day and down 504, or down 4.42%. The SPX was even worse at minus 4.65%, and the Naz fared a little better at minus 3.60% (I guess it’s all relative). It was a great day for puts and not much else.....

Oil dropped down to the low $94’s, which gave Transports, especially Airlines a boost. The drop in oil prices is a welcome relief to the slowing economy and the Financial sector mess. I could spend a lot of time squawking about all the ins and outs of how the financial institutions got into the trouble they’re in, but you’ve already heard it from me over and over.....I could also spend a lot of time talking about the Fed’s bungling going back to the summer of 2007, but why bother, you’ve heard all that from me as well. Of course we can’t leave out the government’s role in dictating business rules to loaning institutions and the utter incompetence of politicians interfering with the free markets, but that’s all been hashed out a bunch of times too.....

Here’s what I will say about the market today: it was a big sell-off, it broke support, it’s intermediate term bearish, and it’s getting pretty oversold short term (that’s what happens when we get a 500 point down day on the Dow). Now, tomorrow is all about the Fed. It was going to be a non-event, and if the Fed is wise, and has learned its lesson, it will keep tomorrow a non-event. But Fed Funds Futures took a huge jump today as traders went wild with speculation on what the Fed should do. Now, as of today, the FFF are pricing in an 80% chance of a rate cut tomorrow! Normally I would say that it’s pretty much a done deal, we get the rate cut. But these are historic times and not normal times. I think the Fed will make a big mistake if it cuts rates tomorrow, which would be like slapping a dirty band-aid on an gaping, bleeding hole. I think the bankruptcies and consolidations due to crazy, selfish speculation are already a done deal. I don’t think a 25bp rate cut does any good, and in fact it could do more harm, especially if it puts a speculative bid under oil and commodities. However, my opinion means nuts in the world of the trading, so here’s the rest of the news. Traders have gone all the way (last June) from pricing in 100bp of rate HIKES by next February, to (today) pricing in 50bp of rate CUTS by next February! Such is the turmoil and confusion of the financial markets. It’s never been more important to focus on the charts over the news, and I still haven’t changed my year-long trading strategy – take it day by day and don’t hold directional positions for more than 1-3 days, and don’t hold many full positions overnight.

One Final Note: I answered the past three posts questions and comments, so I'm up to date. You may find the Friday answer to Francis about "psychology" books instructional.

Watchlist Saturday

Late Evening Note: Bank of America has agreed to buy Merrill Lynch for 44b or the equivalent of $29 per share. Since MER last traded about $17 per share I would expect the stock to pop in the morning - and for Financials to catch a tailwind since BAC is willing to buy MER at a premium. We could still get some negative news bogeys out of LEH and WM, but for now, we may see a bump up on Financials in the morning.

Market Posture:

Dow: IT (intermediate term) Neutral and ST (short term) Bullish to Neutral. The Dow is pausing after the bounce on Thursday. A move above 11,475 could lead to a test of 11,575. A drop below 11,375 could lead to a move back down to 11,250. The Fed will meet on Tuesday. The risk for traders is not any type of rate change but rather a change in language. The Fed will probably do nothing to interest rates but they could hint at the risks of recession increasing due to the Financial sector mess. Speaking of the mess, it seems that every suitor pulled out of the bidding and LEH may be headed towards bankruptcy. CNBC is reporting that the company is likely to file for bankruptcy on Sunday night. The market is probably going to be volatile again next week as traders sort out the Fed, the Financial sector, Hurricane Ike (which looks like it didn't cause as much damage as expected, thankfully), oil, and Goldman Sach's earnings. There is likely going to be some trepidation and deep concern in the market next week, and probably a good deal of hand wringing. You'll do yourself a favor by following the usual gameplan: keep it light and keep it tight.....don't take large positions and don't hold a full directional trade overnight unless you see really clear signals. I just don't see anything that will make me want to approach next week any differently than I did last week - and that means one day at a time.

SPX: IT Neutral and ST Bullish to Neutral. A move above Friday's highs may lead to a test of the 1,265 - 1,268 area. A move below Friday's lows would probably take the SPX back down to the low 1,220 area. The SPX could go tight in the next couple of days, especially if it can't follow through on the two-day bounce.

Naz: IT Bearish and ST Bullish to Neutral. A move above Friday's high might take the Naz to 2,285 - 2,300. A drop below Friday's low would probably take the Naz to 2,209 - 2,200. The Naz is the most bearish of the three major indeces right now. The Naz would have to move above 2,300 - 2,310 for me to change my IT posture.

Here are some interesting Bullish Movers recently: (make sure to check for .10 - .20 cent spreads and also the earnings release date)

Gold: AEM

Financials: ZION, MTB, STI, KRE, RKH, STT, JPM, (NTRS is overbought short-term)

Cyclicals: DD, KMB, WHR

Defense: LMT, NOC

Food&Beverage/Consumer Staples: CL, GIS, PG, KO, (PEP is overbought short-term)

(Retail: this sector is a overbought short-term, but here they are: SHLD, TGT, WMT)

(Transports: this sector is a overbought short-term, but here they are: UPS, FDX)

Note: ESRX, AGN, (SUN is overbought short-term), (COV is overbought short-term)

Here are some interesting Bearish stocks:

Chemicals: TRA

Coal: ACI, BTU, MEE

Tech: ENER

Steel: AKS

Energy: SU, NBL, SLB, COP

Machinery/Manufacturing: JOYG, FLR, FLS, CMI

Note: OI

Tomorrow we will get the Industrial Production/Capacity Utilization report, but I expect the market to be more focused on Financials in the wake of LEH and WM, and Oil in the wake of Hurricane Ike. In addition, traders will be focused on what the Fed might say on Tuesday, although that should be more of a non-event. Oil futures appear to be headed below $100 on Monday based on Sunday indications - because Ike didn't do as much damage as was expected. Here is the reminder that you want to trade what you see and not the news headlines because oil dropping in price was the last thing the media expected. We are likely to have several crosscurrents tomorrow, so it will be important to trade the short swings and take things day to day this week.

Retail Sales Soften the Market Early

Pre-market futures dropped on the news that Retail Sales missed estimates. The miss was larger than expected as the number came in at -0.3% versus +0.3% expected. PPI was also lower than expected, which shows an economy that is not inflationary, but continues to be subdued. Stock market futures were close to the flat-line prior to the reports on the news that the U.S. Treasury and the Fed are working on the sale of LEH through a consortium of firms. There are different opinions on who LEH might be sold to, but most traders are now at least expecting the sale of LEH and the winding up of that whole mess.....

There is the typical pre-market news and jostling and pushing back and forth in other areas, but the main focus will be on the "negative growth" concerns from Retail Sales and PPI. It will be important for the market to hold the line this morning and build off the bounce back from yesterday in order for the move up to continue today.

Hurricane Ike is making just the kind of headlines that keeps the media excited. Some "official" decided to use the term "certain death" for the residents of Galveston Island and that's all I've seen on the headlines since last night. In addition, the media is reporting that much of the Gulf oil production will have to be shut down, and that Houston residents were making an incredibly "bold" decision to stay and "face down" the storm. I'm not sure how Ike will really affect the Gulf Coast, and I am hoping for the best possible outcome for the people in the path of the storm. In the meanwhile, oil is up only about .50 cents in the $101 area.

7:45 am MT: I nibbled on small call positions for JPM, CL, WHR, and LMT. I like how tough some of the Retail stocks are holding up as well, we'll see if that lasts throughout the day. It looks like the market will be fighting for much of the morning, so I don't want to get too much in the way of calls until the battle tips one way or the other. If the Bulls lose the day I don't want to be sitting on a lot of calls. So I'm light and tight for now, but I'm positioned with a few small calls. It's possible that this all caves in, so I would like to see the Dow hold the 11,200 area, the SPX hold the 1,225 area, and the Naz hold the 2,210 area. If we drop much below those levels then we could face a sell-off today. We shall see how the day goes.....

Market Bounces as Oil Drops and Financials Pop

Stock market futures are down sharply on continued capital concerns in the Financial sector. Traders are concerned once again that LEH may be signaling that the banking system doesn't have the cash or the means to meet its obligations. We may get a few news bogeys today.....It won't be surprising to me to see LEH drop sharply again today and for grumblings to spread throughout the news about whether or not the company can stave off bankruptcy. Citigroup downgraded LEH from Buy to Hold, and Goldman Sachs downgraded LEH from Buy to Neutral. I put that little blurb in there not to back up the prior news on LEH - I don't really care about analyst gradings - but rather I added that news byte because I wanted you to see that Citigroup and Goldman Sachs had BUY ratings on LEH as recently as yesterday!......

It looks like the market pause from yesterday will resume with a drop this morning. Remember that the Naz is looking oversold on the charts, and the Dow is coming up on support in the next 150 points or so. That means I want to take advantage of my puts early in the day, scale out of some positions if the Dow drops 100 - 150 points, and then watch for whether or not it looks like any downswing will continue into the close. We may see a typical September selling day today, so I'll play for that, but I'm keeping one eye on how oversold the Naz is getting.

7:40 am MT: The Dow gapped right to support so I sold the DIA puts for a .35 cent profit or 9% gain. I sold the SPY puts for a .20 cent profit or 5% gain. I cleaned out the NFX and MGM puts at basically breakeven. I stopped out of the ECA puts for a .25 cent loss on four contracts (I don't want any more oil trades until Hurricane Ike is done). And I sold the LVS puts into the gap for a big 1.04 profit or 18% gain. LVS may have another $2.50 or so to drop, but I can't watch it as closely as I want to this morning, so I'm locking and walking for now.

12:00 pm MT: I warned before the open to watch minus 150 on the Dow, which is precisely where I sold my DIA puts. The Dow hit a low of 11,098, which was minus 170, and then it was done. I also warned the Naz was overdone, and it's bouncing so far today. At this point I'm not interested in puts anymore.

12:30 pm MT: Here are some interesting call plays that I may entertain before the end of the day: ESRX, SUN, MET, JPM, NTRS, STT, FDX, SHLD, JCP. There are others, but I need to do some more stock hunting for the next hour or so to decide on what I like. I'll wait to see if we get a pullback in the next 30m to decide if I want to get any calls.

9:00 pm MT: Market Wrap: The major indexes bounced back from the support areas I was targeting pre-market. The positive catalysts were a continued slide in oil prices and the rumor that LEH may have a buyer. The bounce today could lead to another move up tomorrow, and then depending on how the weekend news plays out with LEH and Hurricane Ike, perhaps another move up on Monday.

Tomorrow we get the PPI and Retail Sales numbers. As long as both numbers are in the neighborhood of expectations then I don’t expect them to move the market much - because both are August numbers - and the drop in oil will have traders focused on the future numbers. In other words, even if PPI is a little high, traders will speculate that PPI comes down in September because of the drop in oil prices. And even if Retail Sales is a little low, traders will speculate that Retail Sales go up in September because of the drop in oil prices.

If we don’t get any negative news bogeys in Financials or from Hurricane Ike, and the positive rumors of a LEH buyout persist, then traders may continue to buy stocks tomorrow in anticipation of a possible positive news bogey over the weekend. Traders will remember the Fannie/Freddie news bogey last weekend and how it popped the market on Monday - and that might get them positioning into Financials and other stocks tomorrow. If we get some positioning tomorrow, that could push the market up some more, and if we get a positive news on a LEH buyout over the weekend, and positive news out of Hurricane Ike over the weekend, then we could get more follow through to the upside Monday.

I will probably play calls tomorrow, and I will probably scale out of most positions ahead of the weekend rather than count on a positive news bogey over the weekend, even though it could happen. But as always, we shall see what happens tomorrow.....

Here are some interesting Bullish Movers from today:

Healthcare/Biotech: AGN, MHS, ABT, WAG, HUM

Railroads: BNI, CSX, UNP, NSC

Financials: JPM, MET, NTRS, STT, RKH, STI, PRU, BK, WFC, BBT

Cyclicals: DD, WHR, IP, KMB

Retail: SHLD, BBY, EL, GES, JCP

Food/Beverage/Consumer Staples: GIS, CL, PG

Defense: LMT

Also interesting: ESRX, SUN, RYL, ENR, BDK, HD, UNH

Remember to check for .10 - .20 cent spreads and also make sure that the stock is not coming up on earnings in the next 2-3 trading days.

Newsy Day But Market Pauses Anyway

The Naz futures were up over 25 points this morning, which was almost half the drop yesterday. Which is just the kind of volatility and chop we've come to expect this year. Then LEH preannounced (which is just code for warned) about third quarter earnings. Now, this should come as no surprise, but LEH is going to blow chunks and then blow off (I mean spin off.....) a huge chunk of it's real estate assets into a new company that they are enticing other investment firms to invest in.....got that? All that means is LEH is a Broker, and Brokers know how to play corporate games better than anyone else in history. So they overspeculate on an asset class, and when they get their assets burned, they just spin it off into a new company and convince someone else that their assets smell like roses.....

On a separate news byte, but related taste in the mouth.....OPEC decided to cut 500k barrels of oil output per day.....You want to know what I think? I think OPEC watched the drop in oil yesterday after announcing no planned reduction and decided that the frog in the boiling water was getting a little too cool. They have obviously tipped their hand on what price they don't want oil coming down below, which is $100. I actually held out hope for a drop into the lower $90's because they left production alone yesterday, but OPEC is OPEC, and a tiger doesn't change his stripes.....

So oil is up pre-market, but not by as much as expected because the EU is cutting economic growth forecasts and the IEA is lowering their oil demand forecast for 2008 - 2009. The oil news gets even more volatile, as if that wasn't enough....Hurricane Ike is coming back to life and being given a 50% chance of being a major hurricane along the Gulf Coast states. We'll see what really happens with Ike, but for now, expect oil to really gyrate around this morning. Also expect Financancials to be wild, and the stock market to gyrate around as well.

Standing back and looking at the big picture, I expect the market to wiggle/bounce a little this morning after the big drop yesterday. But any chance to bounce it up sharply is pretty much gone, so I'm not looking for a big swing back, but rather for bulls to be subdued and somber. So I will watch for another leg down in the rollover later today or tomorrow, we shall see.....

7:25 am MT: It looks like the market is shaking off the LEH news a bit, and even embracing the spin-off as good news. So the pre-market futures jumped back to earlier levels. We will probably see a fair-sized pop this morning. I'm going to watch the chart construction this morning to determine whether I think it will roll back over later in the day or not. But for now, the morning is shaping up to be a bigger jump than I was looking for.

7:40 am MT: I sold the NYX puts for a small .05 gain just to clean them out. I don’t want to be playing much in Financials this morning, at least until things clear up a bit on LEH. I also nibbled on some LVS puts on the breakdown.

7:50 am MT: I added a little to the NFX and ECA puts. I am looking at some of the other Energy and Commodity puts, but as usual, I don’t want to get loaded up. I nibbled on some MGM puts.

8:05 am MT: I sold the LVS puts for a 1.00 profit or 22% gain in a few minutes. I guess this was one of those 1% a minute trades.....but the LVS traders went frantic (see Humphrey the Bear from yesterday), so like I always say, more money faster.....They almost don’t leave me a choice when they get that frenetic, I have to take the profits. LVS trades this way a lot, just like the Chemicals, Coal, AAPL, etc. I kept a little just in case it takes one more leg down.

8:15 am MT: Here’s a news flash, LVS took another leg down off the already frantic intra-day swing.....Soooooo, I’ll just sell the rest of my puts for even more profits.....I will look for a bounce (is that possible with a cult stock?) to get back in to more puts.

8:25 am MT: I just watched the Market Makers on LVS absolutely blow up the spreads on LVS in the past five minutes. LVS was trading .20 - .30 cent spreads and the Market Makers just blew them out to .80 cents. I actually wanted some WYNN puts along with the LVS and MGM puts this morning, but I got there too late and the Market Makers had already exploded those to .80 -.90 cent spreads. These guys are, well.....I’m not going to say it.....

8:28 am MT: The LVS Market Makers just shrunk the spreads back down to .30 cents. Now, let me explain to you what they just did. They obviously saw the end of the order flow coming for selling the stock and buying puts this morning, so they artificially widened the spreads by .50 cents to an .80 - .90 cent spread! That accomplished two things for them. The first was that is kept the traders who were long puts from getting a better sell price and that kept more money in the Market Makers pockets. The stock actually dropped a dollar from my last sell order on my last put. But the put was still bid at the exact same price of 6.00!! The second thing it accomplished for the Market Makers was that they vacuumed up all the amateur traders at an exploded price. So the dumb money just bought puts at 6.90 on the Ask right at the bottom, and the Market Makers said thank-you very much. Then the stock ticked up .20 to .30 cents and they immediately ripped the spread back down and those traders that just bought at 6.90 saw the value on their option drop to 6.10 to sell on the Bid in a matter of seconds. Now, at 8:36 am MT the bid is 5.80.....Those amateur traders and Hot Stuff traders that don’t understand this game, and don’t know how the Market Maker operate just got nailed.

I know you’ve heard me say this before, but the Market Makers are not your friend. Many of them (I want to say most but I’m trying to tone myself down a bit here.....) are pretty ruthless (again, toning down what I really want to say). They would sell their own grandmother for a dollar (ok, I couldn’t hold back anymore). It’s amazing to watch these guys in action. I’m a capitalist and a pure speculator, but I still can’t relate to the way they stick people in the eye every day. I understand protecting your inventory and making a profit as well as any speculator, but wow.....There’s protecting inventory and there’s jamming a crowbar into the next guy's assets to pry out a buck.....I guess I’ll come back off of my soapbox and get back to trading. I’m really glad that I have the experience with risk management and Market Makers that I do, because I made a ton of money really fast at a time when some people lost a lot of money really fast.....

11:30 am MT: Here is a recap of the past two hours: I added to my STI calls. The stock is potentially forming an Upside Gap Three Methods. I also like NTRS, which is also holding the breakout. I just don’t want to get very much in Financials.

I also bought SPY and DIA puts at 9:10 am MT and then sold them at 9:30 am MT for quick 5% and 6% gains respectively. A little while later I bought back in to the same puts.

I sold to open four October Iron Condors:

DIA: 102/103 123/124 for a .21 cent credit or 26.5% return on risk for 37 days

DIA: 104/105 121/122 for a .32 cent credit or 47% return on risk for 37 days

SPY: 112/113 134/135 for a .24 cent credit or 31.5% return on risk for 37 days

SPY: 114/115 132/133 for a .34 cent credit or 51.5% return on risk for 37 days

12:00 pm MT: The market continues to consolidate and pause today. So I’m just sitting tight with what I have, and watching to see which way this breaks in the next day or two. There’s not much to watch right now, unless watching paint dry is exciting.

4:00 pm MT: Market Wrap: Today was a pause day in the market. I want to go through all the news in Financials like LEH’s preannouncement, or WM caving in, or downgrades on Banks.....but sometimes it just gets to the point where it’s not even worth trying to sort it all out. Suffice it to say that Financials were volatile today. FDX guided up, which is what you would expect a Transport stock to do with the price of oil dropping. That’s why some of the Transport stocks have been moving up lately. There was a whole bunch of other news about the global economy and oil among other things. At some point you just have to walk away from the really newsy days and all the micro stuff and just look at the charts. Today was a pause day in the markets. It was a somewhat volatile pause day, but it was a pause and consolidation.

The Naz is starting to look pretty oversold, although it could take one more leg down to the 2,200 area or even a little lower. The Dow and SPX are not nearly as oversold and both could take another leg down, especially the Dow. There isn’t much else to say other than watch today’s highs on the market as short term resistance. If we start going above those points tomorrow, then we could bounce/chop up a little. If the Dow goes through the 3-day low and cracks below 11,200 then we could get that next leg down to the 11,050 area. Until tomorrow, we shall see.....

Market Caves In on Selling in Financials, Tech, and Oil

Oil is down a little ahead of the OPEC meeting in Vienna this morning as the Saudi Arabian oil minister signaled that the cartel will leave supply output unchanged. This would be especially prudent given the uncertainty over Hurricane Ike, although I'm sure OPEC has their own interests in mind.

As long as OPEC and Ike don't do anything to spike oil, then there isn't much else for the market to focus on today, unless we get more Financial sector news or a news bogey. For now, this morning, the market looks set to carry through a little off the bounce from yesterday.

I was targeting a swing bounce Monday into Tuesday, and I still am. Perhaps we will see a continuation Wednesday, but I'm playing for today and scaling out of most of what I do at the end of the day unless the market looks like it will stay strong or hold up.

8:00 am MT: The market came quietly out of the gate this morning. There are little news blurbs here and there that the elevator analysts are glomming on to, but the real news is that there is no real news. Price action is subdued as the market digests the big move yesterday, so we shall see if the market can punch up a little more today or not. In the meanwhile, several of my trades are on the move.

8:10 am MT: I sold part of the KMB calls for a big gain. I also sold part of the PEP calls for a nice profit. Finally, I stopped out of the PG calls for a small .10 cent loss. I’m watching Financials for another possible move, and I’m going hunting for more stuff to trade.

8:23 am MT: I sold some more of the KMB calls.

8:25 am MT: I sold the last of the KMB calls right into a Shooting Star on the 5m charts. The total trade was a profit of 2.17 or 49% gain from yesterday. I had ten contracts on this one, so I pulled in $2,170. I may do one more intra-day trade on it before the end of the day, we shall see.

8:35 am MT: I was watching Financials for a possible call trade, but they caved in a little too much for my liking this morning. I’m putting them on the back burner for now.

8:45 am MT: I sold the rest of the PEP calls for a .44 cent profit or 23% gain.

8:55 am MT: I picked up some RTN calls on the Straight Flag/Rising Three Methods on the 15m charts. I also grabbed some PEP again for a quick intra-day trade off the Short Flag on the 60m charts. I’m watching NTRS, STI, FDX, JWN, KSS, KMB, RTN, KO, and PEP right now. I like FDX, I may get some of that.....

9:10 am MT: I nibbled on FDX calls.

9:20 am MT: I dumped the RTN calls for a small .05 cent gain. I wanted the Rising Three to play out and instead it’s starting to go all Dumpling Top on me, so I’m going to wait this out and see what happens. I don’t like the Hanging Man on the 60m charts of the SPX, and I don’t like that the market already dropped to the area of the bottom end of the gap from the high on Friday. However, the gap is holding for now, so I’ll keep picking and pecking a bit today.

9:45 am MT: I added a little to the PEP calls. FDX is starting to hold, so I may pick up some more. In addition, I nibbled lightly on STI calls. I’m not super inspired and excited about the rest of the swing we are in, but if the market holds up then I’ll be positioned to make a little more before the end of the day. I’m guessing that the market will drift and squish through the rest of the day until the last hour, so buying will be met with selling and selling will be met with buying. I don’t want to be sitting on too much stuff if that’s the way I see the rest of the day, but I want enough in case we get a little movement later in the day.

10:10 am MT: I nibbled on some KMB calls again on the Bull Flag intra-day. I have what I want for the rest of the day.

10:50 am MT: I sold the PEP calls for a small .01 gain, or basically breakeven. I think it’s going to double back intra-day and I can pick it up cheaper later on if I decide to trade it one last time in the current swing.

1:00 pm MT: I sold the KMB calls for a small .08 cent gain, so basically breakeven. I also stopped out of the FDX calls for a .40 cent loss or 8%, but FDX was only three contracts so it was a minimal loss. In addition, I picked up the PEP calls again for a late day rally.

Oil cracked down to new lows after OPEC ministers said what they had already hinted they were going to say – no output reduction. The bigger news, which of course didn’t make the news, was that Hurricane Ike was downgraded to a Category 1 Hurricane and is not expected to do much damage to people or oil platforms. And since the news is good news it didn’t make the news.....I warned you yesterday (and previously) not to trade the stock market based on what you see come out of the media, and today is yet another prime example. I can imagine how all those traders who went long oil stocks on the Hurricane “headlines” and the Boone T. Pickens OPEC “headlines” feel now about their energy stocks….In fact, based on the way the Hot Stuff Managers were unloading Energy and Commodity stocks today, I would guess they felt a little like Humphrey the Bear.

If you’re not quite sure what I mean, watch this video. When you get to the time area of 1:16 through 1:38, imagine the Hot Stuff Gang running around like Humphrey today trying to dump their losing trades before they keeled over and hurled their guts out.

Bear Hunting Season

The idea with good speculating is to keep yourself disciplined and under control. Here is another example of what not to do.....

Fishing Season

On a related note I bought puts on Energy stocks.....

There is so much carnage over there right now, so I didn’t do much but nibble on puts for NFX and ECA. I also picked up puts on NYX. If the stocks gap down in the morning I will immediately sell the puts. If we wiggle, then I may pick up puts on other Energy and Commodity stocks. But be selective, there are many of the stocks that had extreme selling today.

1:40 pm MT: I sold the PEP puts for another .20 cent gain. My total tally on the day for closed positions was a profit of $2,500. Today plus yesterday gave me a two day gain of $3,334 in the Papermoney account, which is right in line with what I wanted out of what I thought was going to be a Monday –Tuesday swing. As it turned out it was about a day and a half before the sell-off.

3:00 pm MT: Market Wrap: Oil sold off down to as low as $101.77 after Hurricane Ike was downgraded to Category 1 and OPEC left output alone. The selling in Energy and Commodity stocks put some weight on the market’s back, but the relief in oil prices, which lately has been positive for the market. In today’s case, the other problem was that Financial sector trader’s came back to reality after playing with the unicorns and the elves yesterday. I warned that I didn’t think a government takeover of Fannie and Freddie would change anything fundamentally in the Financial sector, and today it looks like the rest of the market caught up to that idea.

You can pretty much throw a dart a Energy and Commodity stocks for puts today, but Financials, Tech, some Cyclicals and other areas rolled over pretty good as well. I stated yesterday that the candlestick on the SPX and Dow should look more like the Hanging Man on the SPY and DIA, so today’s price action didn’t surprise me at all. The Naz looks especially bearish short term and is likely headed towards 2,170 – 2,195. I speculate that 2,195 is very doable tomorrow or Thursday. It’s tougher to get a read on the SPX and the Dow because of the messed up candlesticks from yesterday. The SPX does look like it may head down a little more to the 1,210 – 1,218 area. Remember, this is September, and September is typically a bearish month in the markets

If the market and stocks gap down in the morning then I’m a seller and not a buyer. If we wiggle a bit for most of the day, then I may pick up more puts and see if the market legs down one more time tomorrow afternoon or Thursday. We are coming up on more economic data tomorrow through Friday, so traders could react to those types of news blurbs. However, don’t lose sight of the fact that this is still September, regardless of what you read.....