Earnings Gamers Keep Playing it Bullish

Pre-market futures are up on INTC's earnings last night, and BAC's and C's earnings this morning. So far the Banks (JPM, BAC, and C) are playing the earnings game spectacularly, and INTC has played it perfectly as well. The actual numbers were horrible, but the illusion is that the companies "beat" expectations. So with a perceived oversold market, and a Beardicat Zone that is holding so often it's starting to become a market tradition, the major indexes are pointed north this morning.

All three major stocks (INTC, BAC, and C) that reported earnings are up anywhere from 3.5% to 8.5% pre-market. The market itself is set to gap open and head right for those areas I posted last night. Refer the Dow chart I posted last night for the Beardicat Zone. As for the SPX, just like the Dow, it bounced right off the low support line I had drawn out for you ahead of time. The Hammers are likely to confirm today.

Here is a chart of the SPX:
(click on image to enlarge)

The SPX is set to open right into the short term resistance zone at 853. The pre-market futures have backed off a little bit on the CPI report, but this morning is probably going to be pretty bullish. The first wiggle will probably come right in the 857 area on the SPX. If that causes a gap test (on the SPY), and the gap (or slightly above around the 845 - 850 area) holds, then it may open the way for a short swing call play back (on SPY) into the 862 - 864 area, and possibly even all the way to 867. I will come in and update briefly later on, but that's how the morning could possibly shape up. As always, we shall see.....

7:37 am MT: Intra-day Update: The SPX pumped right out of the gate and ran right to 857.93 and now it's giving the first wiggle on the 5m charts. If this is going to be a "chaser" momentum type of morning then just the one 5m candle will turn and burn, but I don't think it will play that way.

Here is a 5m chart of the SPX showing the wiggle right at my target:
(click on image to enlarge)

7:41 am MT: Intra-day Update: Right in here is an area to start scaling in to "paper" calls. I would only look for a small part of the SPY position in the 85.25 - 85.45 area, and then pick up the rest when it turns and confirms.

Here is a 5m chart of the SPY showing the call buying zone:
(click on image to enlarge)

7:49 am MT: If you picked up a little on the 3 candle momentum pullback, that's good. The market is ramping again, but it may run out of a little energy right in here and double back again.

7:50 am MT: There's the double-back, so you can smooth this out on the 10m or 15m charts now and start flipping back and forth between the 5's - 10's before going to higher time frames later.

7:53 am MT: This is why I usually go small on the first wiggle. Now I can pick up another contract a little cheaper than the first entry.

Here is an updated 15m chart of the SPY (7:57 am MT):
(click on image to enlarge)

If my cost basis on some calls is in the 85.00 - 85.25 area, and my stop is in the 84.00 - 84.25 area, (maybe as low as 83.90), then I'm risking a little over a dollar for a possible target of 86.25 - 87.25, which is 1-2 dollars. I can keep the risk to .75 cents if I want and target the 1.25 move to the bottom of the gap from several days ago at 86.25 - 86.50. The reward to risk is about 1.5 to 1, but the probability is above 50%.

8:04 am MT: Intra-day Update: I'm taking off again (this is a vacation day.....), but here is the last chart update of the SPY on the 15's.

15m chart update on SPY (8:06 am MT):
(click on image to enlarge)

You can see the channel forming on the 15's, which is a Momentum Pullback / Bull Flag on the Gap. If it breaks to the upside in the next 15m - 30m then the green dot (86.50 zone) becomes the target. As always, we shall see.....

8:10 am MT: Intra-day Update: The current 15m candle went exactly to my resistance line on the channel I just drew for you and pulled back, so the channel resistance held for now. The channel appears to be the correct identification of how traders are consolidating things after the first pump.

Well, you can tell it's hard for me to pull myself away from the action even on a vacation day, but I'm going to make myself do it.....

I'll come back in later and do an update.....

1:50 pm MT: Late-day Update: The market has been very moody intra-day. Price action crunched down through the gap only to come right back. I cherry picked a 3/4 size "paper" call position on the SPY right into the low 84.25 area - starting from the 85.00 area. I didn't get stopped out, but I also didn't make much money. I ended up selling everything just before the close for a small .06 cent gain. So pretty much a scratch day on the SPY, although other individual stocks moved a little better.

I don't want to hold a full position over the weekend because we are still day to day with Earnings Season. The market is in the process of trying to Hammer out a bottom, so it's important for Tuesday (remember that this is a Holiday Weekend) to hold the lows of today in order to build on the short-term reversal pattern.

Gary: Here's a chart of the ADX as an example of how to set it up for period, color, and style:

30m chart of the SPY with ADX on a 14 period:
(click on image to enlarge)