Rangey Bulls Keep Rowing...but it's not easy with hooves

Earnings and sales reports are mixed, with HPQ and AAPL down pre-market on different reports, and NBL, S, CVS, and NEM up after earnings reports. In addition, the January PPI numbers came out higher than expected, which means that goods at a producer level are holding their pricing power. The biggest number of the morning, and the one that matters the most going forward was the Weekly Jobless Claims report, which came out only slightly worse than expected.

Overall, the news really isn't that great, but it's also not "more catastrophic than usual", which means the Bulls may decide they like the taste in their mouth after chewing for a while. The taste may not last for a long time, but it may be enough to start a short term bounce. Pre-market futures are up strongly as a result of the Bulls sweet tooth, and the SPX (SPY) is set to gap up close to 800 as a result, which would probably start the process for a short term bounce.

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

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

The SPX looks stronger pre-market than the Dow and will probably make a run at the 805 area this morning. I speculate that we will see a gap with a little wiggle, but that 805 gets tested fairly quickly. The key to the day is the SPX holding the 788 - 790 area. A dip below those areas and it gets a little tougher to hold on to calls. However, the true drop dead area is a move below 780. If the SPX can hold the gap, then there could be some nice call trades between the low 790's and the 805 - 810 area. I don't expect the SPX to punch through 810 today, but as always, anything is possible. A close above 805 would confirm a Morning Star Reversal, and it would be nice to get a little volume behind that if it happens.

The Dow is not as strong as the SPX early-day, but it is set to gap up (Dow/DIA) over the 7,630 area, which - like the SPX - is above the high of yesterday. The Dow has a probability of pushing to the 7,700 area today, and perhaps overshoot a bit just like the SPX. A strong move would take the Dow to 7,750, and like the SPX, I speculate that the Tuesday candle will hold and the Dow won't make it to 7,800 today. If the Dow can close above 7,700 that would show some strength, and a close above 7,750 would be a nice Morning Star Reversal. A drop below 7,480 is a drop dead area for calls.

Remember, you don't have to set trading volume records every single day, some days (like yesterday) there just isn't anything there. Today looks a lot better than yesterday, but that doesn't mean you have to open up the barn doors. It looks like a decent day for some short-swing calls, but scale in after the open, don't dog-pile in (just in case we get a gap test). If things hold and start to run towards 805, then add some more and take the short swing. Scale out of some of the call positions in the 805 area and bring your stops to break-even on the remaining contracts, and then scale out of most of the rest if we reach 807 - 810.

11:20 am MT: Intra-day Update: The Bulls went Rangey again.....I have some SPY calls from this morning, but since I scaled in just as I mentioned above, I was able to pick up some at the bottom of the range and lower my cost basis. Now the market is headed towards the top end of the range, at which point I will unload the calls for a small profit and probably stand back for the rest of the day.

Here is a 30m chart of the SPX:
(click on image to enlarge)

You can see the 3-day range is still intact and the market is bouncing a little intra-day. Anything in the 792 - 797 area is a good place for me to start scaling out of most of my calls. I won't enter a new position until the range breaks above 800. It's also possible the range breaks to the downside, so I will be ready for that as well, although that will be a smaller "paper" trade for me since the Bulls get frisky in the mid 7000's on the Dow.

12:10 pm MT: Intra-day Update: There's not much more to say, this is another range-bound day. I did scale out of the SPY calls around 790 for a small profit on the day. The Bulls keep fighting for the low end of the range so this could be a basing pattern intra-day. It could also be a Rectangle continuation that leads to a downside move. Either way, the market is range-bound right now and I'm tired of playing the lows to highs, so I'll watch for a break of the range, perhaps tomorrow, we shall see.....

12:20 pm MT: Intra-day Update: The market is starting to break down on the range, this is a critical moment for the Bulls. If we don't see another confirmed bounce on the 30m charts soon, the Bulls could lose the battle.

12:40 pm MT: Intra-day Update: The Bulls keep fighting for the low end of the range, I'll give 'em that. It's just not easy to row a paddle with hooves.....and the paddle may be about to slip into the water.....

1:50 pm MT: Intra-day Update: Just as I speculated, when the Bulls dropped a paddle and the market broke the low end of the range, they pulled out another paddle from the boat and started rowing frantically.....another range-bound day.....