Market Gets Another Leg Up on Oil

No news is probably good news as traders quietly comes back to work Monday morning. With such strong price action late last week, it's not surprising investors are trickling in. There are no key economic or earnings reports scheduled Monday or Tuesday morning. This brings the focus even more clearly on the focus all along, the price of oil. Oil is up a little pre-market on the supply disruption concerns over the Russia/Georgia conflict.

Just like Friday, you would do well to keep one eye on the oil chart along with one eye on the stock market for clues about direction today. The tone may be muted this morning, but as long as oil prices stay down, then their should be some bullish carryover from last week before we see a swing consolidation.

8:10 am MT: I sold the AMZN calls into the spike up this morning for a nice profit. I also sold the KSS and MMM calls into the spikes up this morning. I picked up URBN when it wiggled out of the gate and I’ve already sold part of the calls for a profit. I also picked up some DD calls.

The AMZN trade was a 1.24 profit or 24% gain. The KSS trade was a .68 cent profit or 17.5% gain. And the MMM trade was a .35 cent profit or 8% gain. I also locked down part of the URBN calls for a 19% gain so far.

I’m looking at Retail, Leisure Spending, and Cyclicals this morning. I may trade back into those areas again after a mid-day pullback. The market indexes may be getting tapped out short term, so I’m watching those closely. The Light Sweet Crude chart is working exactly opposite the SPX, and I may pick up some SPY, DIA, and maybe some Q’s calls. It’s a little tricky over there because I’m seeing some Broadening patterns on SPY and DIA, and I’m not a huge fan of trading into Broadening patterns.

8:45 am MT: After the initial flurry of buying in Retail and Leisure stocks the market seems to be quieting down. I sold the last of the URBN calls for a total trade of .23 cents profit or 9% gain in an hour. I am done with URBN, and Retail is looking parabolic, but I may do one more short swing on AMZN, maybe…..Retail is very extreme this morning.

9:15 am MT: The Naz leading the way and is getting pretty close to its 200 day moving average. The SPX is following a bit, and the Dow is lagging the other two indexes.

9:45 am MT: Oil is breaking down, which is giving the market and Retail/Leisure a boost.

10:00 am MT: The extreme buying in Retail is continuing and if it was red hot before, it’s white hot now. I sold the DD calls for a .30 cent profit, or 10% gain intraday.

1:50 pm MT: I picked up some AMZN calls mid-day and sold them in the last hour. I updated the total trade on AMZN today to a profit of 1.59 or 31% gain. I bought back in to a small position on AMZN again just before the close, which I will sell into any type of early bump tomorrow morning. I made a total of $1,580 in profits in the Papermoney account today, although I left several thousand on the table because of the extreme moves on AMZN and KSS.

2:30 pm MT: Market Wrap: Oil dropped through Friday’s low and off we went with the market again. The inverse correlation between the stock market and the price of Light Sweet Crude is pretty tight these days. I’m not surprised that we followed through today, I was playing it that way from Friday, and I stated on this blog to watch for a bump Monday-Tuesday (and my Watchlist was geared towards that type of movement). I’m also not surprised by the late day profit taking after such a parabolic Flash Bang type of move over two trading days. It’s possible that the market reaches one more time tomorrow, but after Tuesday I’m being cautious on my calls. If the Dow drops below 11,700 then I’ll be standing back and waiting for the next idea.

The Naz went exactly to the downtrend line I drew for you on Saturday’s post, and then pulled back. The Naz and the Russell 2000 are, by far, the strongest of the major indexes right now. There hasn’t been anything new to the theme lately: Retail, Leisure Spending, Tech, and Cyclicals were up, and Energy and Commodities were down. However, Energy and Commodities might start getting a little noisy, and a short term bounce over there will consolidate all the other sectors I have been playing calls on the past two weeks.

There aren’t any noteworthy economic or earnings announcements tomorrow, so Tuesday could still see an early reach up in the markets, but I’ll watch that close for a late day fade. We will get more noteworthy corporate earnings on Tuesday after the close: AMAT, NVDA . Then Wednesday before the open: DE. We also get a more noteworthy economic report on Wednesday before the open with Retail Sales. Thursday brings CPI and Initial Jobless Claims. So if the price of oil stabilizes a little tomorrow, perhaps later in the day, then traders will focus (briefly) on earnings and economic reports for Wednesday and Thursday’s sessions. Oil may be mostly priced into the short term swing, with the possibility of some more wiggle tomorrow. Ultimately, oil could drop to the $100 area, but on the current downswing oil may find support between $110 - $115. In other words, we may have enough wiggle down in oil still on the current swing to wiggle up the markets a little more, but most of the swing has probably been priced in, and we may have to wait for another downswing next week to get to $100 - if it happens.

Here is a chart of the Naz showing how it hit right on the resistance line I drew for you, and closed right at the 200dma:
(click on image to enlarge)

Once again, keep one eye on the chart of Light Sweet Crude, that has payed off nicely the past week for stock and options traders.

Watchlist Saturday

Market Posture:

Dow: IT (intermediate term) Bullish and ST (short term) Bullish. The Dow is barely through the 50dma and still climbing towards the top side of the long term channel. It's a bit choppy at the bottom end of the channel, but traders continue to shake off all other bad news and focus on the drop in the price of oil. Now if only that would translate to the pump, where I'm still paying over $4.00 per gallon.....which is probably why it's choppy at the bottom side of the long term channel. Traders want to take it up, and the Bulls keep punishing the Shorts every time they try to roll it over, but the price of gas is still an issue until its not.....There is resistance in this area on the Dow, and then a nice big vacuum until the 12,000 - 12,100 area. By the way, notice that the 200dma is now tracking along with the top side of the long term channel.

Here is a longer term view of the Dow:
(click on image to enlarge)


Here is the same view smoothed out with Weekly bars. Based on the recent price action, the Dow may reach for 12,000 sometime this week before pulling back:
(click on image to enlarge)

SPX: IT Bullish and ST Bullish. The SPX is bumping its head right on the 50dma. If it can get through that resistance, then there is a nice vacuum all the way to the 1,320 - 1,330 area, which is also the convergence of the 200 week moving average and the 20 week (or 100 day) moving average. Like the Dow, the SPX is fighting its way off the bottom of the long term channel and moving towards the top end of the channel. And like the Dow, it's traveling in an intermediate term upward channel/wedge pattern in the process. In other words, it's still a bit choppy as Bulls fight off the Bears and gradually push things north.

Here is a longer term view of the SPX:
(click on image to enlarge)


Here is the same view smoothed out with Weekly bars showing the convergence of the Weekly moving averages. Like the Dow, the recent price action on the SPX suggests another leg up in the current move, which could take the SPX towards 1,320 before a swing pullback.
(click on image to enlarge)

Naz: IT Bullish and ST Bullish. What a difference Wednesday and Friday made on the chart. The Naz has really cleaned up its act and the Bulls are solidly in charge. The Naz cleared its 2,350 resistance and went Bang Bang with a little wiggle in between on Thursday. You can see that the Naz is clearly headed towards the 200dma and the long term downtrend line in the 2,440 - 2,450 area. The current swing is pretty extreme, so I'm not looking for the Naz to be up every day this week. If the Naz takes a quick thrust to the 200dma on Monday or Tuesday, it's probably done for at least several days of consolidation off the parabolic short term upswing. The Q's and Tech stocks may be a good call trade again early in the week if the Naz does shoot for the 200dma right away.

Here is a longer term view of the Naz:
(click on image to enlarge)


Here is the same view smoothed out with Weekly bars showing the long term Double Bottom. If the Naz clears 2,450 there is a huge 100 point vacuum all the way to 2,550.
(click on image to enlarge)

Stock Watchlist:

Note: I indicate stocks that may be starting to go bullish (or bearish) but are not quite ready in italics. I indicate stocks that are bullish (or bearish) but may be too extended short term in parenthesis. I indicate stocks that are bullish (or bearish) and might still be playable short term in a regular font. I indicate stocks that are bullish (or bearish) that appear to be closest to a buy signal, or are giving a buy signal, in bold font. The bolded stocks are the most compelling to me because they may be a trade entry soon.

Here are some interesting potential Bullish stocks for Monday-Tuesday:

Retail: URBN, KSS, AMZN, JCP, TGT, BBY, TJX, RTH, SHLD, (RL)

Leisure Spending/Casinos/Travel: HOT, RCL (almost a Rising Three Methods), WYNN, LVS, (MCD, CCL)

Transports: (FDX, UPS)

Financials: HIG, STI, MET, BK, STT, NMX, (MS, MCO, PRU)

Tech/Services: ESRX, QCOM, (ADBE)

Railroads: CSX, NSC, UNP, BNI

Cyclicals: UTX, MMM, DHR

HMO's/Healthcare: WLP, HUM, AET, BDX, (CI, BAX)

Defense: LMT, GD, NOC, RTN (confirmed Rounding Bottom)

Food&Beverage/Consumer Staples: GIS, PEP, KO, (PG, CL)

Note: DD, IR, MHS, COV, QQQQ (confirmed Rounding Bottom)

I'm focused on bullish stocks on Monday and Tuesday or so, but I will build a bearish watchlist during those days in case the market pulls back. However, the pullback will probably be in the bullish stocks, not the currently most bearish stocks like Energy, Commodites, Gold, and Utilities. So there's not much point in me developing a bearish watchlist for a couple of days until I see some further development in the current sector rotations.

One final note: review the Wednesday, August 6th posting if you are interested in getting some free educational documents from me.

I have emailed out documents to all the requests as of 8:15 pm MT Sunday night. There are 3-4 of you that have email filters that aren't allowing my attached-document emails to get through to you. If you requested the documents and haven't received them by now, then you may need to email me with a different address.

Also, David H. showed me a nice watchlist tool on TOS that you can enter your Index list and get a histogram readout of current price action. It looks pretty slick. I'll play around with it and see if I can demo that on VC on Wednesday or do a write-up about it here. Thanks David.

Market Pops as Oil Drops

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

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

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

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

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

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

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

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

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

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

Market Rolls Over

Note: For those of you who received my Continuation Pattern Search document: On the screenshot of the Power Prosearch there is an error that Troy caught. Stock Price should be In Between (as per the directions I wrote on constructing the search in the document), and not High As Possible. I corrected the screenshot and will re-email out the updated file to all of you tomorrow. If you follow the written directions those are correct, but I wanted to make sure the visual is perfect as well, so expect the new file tomorrow.

Pre-market Futures are down after AIG missed expectations. Once again, Financials are front and center as that sector still continues to write down credit market losses. AIG has now lost more than $40 billion dollars in writedowns. The stock is down 11% in pre-market trading. WMT is also down a little as the company came short of expectations for July same store sales. The final blow this morning is the price of oil, which is up over $120 a barrel and climbing towards $121.

It looks like we are headed for a consolidation day at the very least. It may be pretty tough for traders to simply shake off this morning's news and push the Dow up through 11,700. I didn't hold much in the way of calls overnight (as usual) and as usual, I'm glad I didn't. Traders don't like uncertainty, and every time it looks like Financials have stabilized a bit the sector puts out another news bogey. It may be that the bulls simply shrug off the news and climb a wall of worry, but those odds are a lot slimmer today than they were yesterday. The news that will help the most is if oil turns right back around and retreats towards $116. But the stock charts in Energy and Commodities yesterday were suggesting another 1-2 days in an oversold bounce, so it may be the overall market needs to consolidate today.

If bulls take back over mid-day today like they did yesterday, I may pick up some calls again, but I need to see price action hold up this morning with some decent relative strength in order to do that. I'm not to keen on puts just yet either, so I may be sitting on my hands for a few hours while traders slosh and toss, and churn and burn, and figure out which way they want to take the market.

7:30 pm MT: Market Wrap: The Dow and SPX confirmed rollovers and are headed back towards the lower diagonal line on the recent Triangle consolidation. AIG started the fun with a worse than catastrophic earnings report, which isn't easy to do, so congratulations to AIG's management team.....Citigroup added to the discontent in Financials after agreeing to settle allegations about misleading investors.....Retailers piled on the love with worse than expected July Same Store Sales. Weekly Jobless Claims rose to the highest level in six years hitting 455k versus the 420k expected. And finally, oil climbed to almost $120 per barrel. You pretty much couldn't news bogey the market much worse than that.....

Two interesting things about the day. One is that it didn't sell off harder than it did, and two that oil retreated several dollars off the high. Those two events are correlated in my book, and the main reason that selling wasn't worse than it was. The price of oil continues to be the number one catalyst behind market movement lately.

Tomorrow, before the open, FNM reports earnings. If the company does a better job than FRE (and AIG) and actually meets the catastrophic expectations, then the Dow might wiggle back to 11,500 out of the gate in the morning. If the price of oil stays in the $119 area early in the day, then that scenario is all the more likely. There could be a nice setup for some DIA puts (or SPY puts) at that point. I may watch for an intra-day test of the 115 area on the DIA and pick up some puts. If oil climbs a bit into the low $120's again, like today, then the DIA (and SPY) will probably roll over and head towards the 113.50 - 114 area. If oil drops below $118 then I would be cautious, and if it drops below $117 then I would probably be stopping out of my puts. Unless we get a drop in oil to the $116-$118 area, I'm not looking for a bullish day on the market tomorrow. It's possible that FNM blows us away, or we get an intervention news bogey by the Fed or Government, but outside of that, I can't see the market getting away from the current high correlation to oil prices.

Here is a chart of the Dow to give you a visual of where traders are taking things:
(click on image to enlarge)


Here is a chart of Oil to give you a visual of short term support and resistance, and how a little wiggle might effect a DIA put trade:
(click on image to enlarge):

Some Final Notes: I can't see any scenario where I want to hold any of my short swing trades over the weekend. So I'm playing how I have been playing most of the year, which is short swings that I keep intra-day on most of the position for my directional trading, and Iron Condors for my intermediate term type of trading.

8:30 pm MT: I have emailed the documents to all of those of you who have emailed me about the referrals program. If you haven't received the files yet, email me again. If you don't know what the program is, see the post below.

Referral Program

Anyone who refers this blog to five friends or fellow traders will receive my Index and Sector Watchlist and my Intermediate Term Continuation Pattern Search. Both documents are in Word format.

The Index and Sector watchlist is a list of key indeces and sectors that makes it easy to spot day to day strength and weakness across the stock market. In addition, it is a simple, but powerful list for spotting sector rotation.

The Intermediate Term Continuation Pattern Search is a Power Prosearch that finds strong, bullish stocks in Intermediate Term Continuation Patterns. In addition, I include a tutorial on the Basing Pattern Family (all the Cup With Handle variants), including charts examples with annotations. You won't find this instruction anywhere else. I just ran the search a few minutes ago and it kicked out a bunch of stocks in nice bullish basing patterns showing excellent relative strength.

Just email me at tradestudy@yahoo.com and let me know that you have referred the blog to five friends or fellow traders, even if it has been in the past. I will take your word for it and email you out the two files. If you are at events or conferences, you can probably get the referrals out pretty quickly.

The Naz Dreams Green as the Market Shrugs of Freddie

Earnings are still pushing the market around a bit as CSCO beat expectations and is trading up over 4% pre-market and FRE missed expectations and is down 10% pre-market. The Naz and SPX futures are down just a little before the open. It looks like the Naz won't be gapping through resistance at 2,350 at the open, but will have to fight its way through during the day. I speculate that the indexes will push up again today, but I want to see if the wiggle out of the gate holds up in the morning.

The big question for the day is this: will traders be more focused on the fear of Freddie and the Nightmare on Wall Street or the substance of Cisco and What Dreams May Come?

We've had a lot of up and down price action at times this year, so we'll see if that cleans up a bit on the current swing and we get 1-2 more days of follow through off the move yesterday.

Here is a recap of my trading day:

7:20 am MT: It looks like Financials just can’t keep themselves out of the news as usual. FRE, ABK, MS, and MER all poked their heads in there and stirred things up (or down). The biggest deal was FRE missing even catastrophic expectations, which isn’t easy to do, so congratulations to FRE.....We’ll see if the bulls climb a wall of worry or if we drop back into chop and slop. I’m playing for bullish resilience, but as always, we shall see.....

7:40 am MT: I sold the last SHLD call, which closes the trade as a 1.71 profit or 22% gain. I sold the last WHR call, which closes the trade as a 1.07 profit, or 18% gain. I sold the NSC calls for a small .18 cent profit, and I sold the UNP calls at breakeven. I am still interested in getting back in to WHR and NSC later in the day. I’m also looking at DIA, SPY, and QQQQ calls if they show themselves.

7:50 am MT: I sold the ADBE calls for a small .08 cent profit mainly because I think I can get them later in the day at a cheaper price. The market is a little fussy out of the gate because of fear. We’ll see if the bulls can keep their breakfast down and show some steel today or not. I sold the DHR calls for a small .08 cent loss. The price action over there is pretty wild, and I want it to settle down a bit. I wouldn’t mind the wiggle and figgle on some of these stocks this morning if the market wasn’t swooning just a little bit. Traders are more focused on the fear of Freddie and the Nightmare on Wall Street than they are the substance of Cisco and What Dreams May Come so far this morning. If the bulls take back over, then I will get back in to a few of these trades that I exited this morning.

8:10 am MT: I sold part of the ABT calls for a .21 cent profit or 8% gain so far. I’ve culled back to three partial positions from what I carried over from yesterday. I will go back in again when the mud clears off the windshield a bit.

8:15 am MT: Energy and Commodity stocks are bouncing, which should not come as a surprise since they sold down pretty sharply on the most recent downswing. Fast Money was itchy like it had the rash of a thousand acres of poison ivy in its pants because all it took was a little bump in oil prices from $118 to $119 (which is nothing in context of the recent $30 dollar drop) to set their collective rash on fire and get them jumping up and down and screaming to cover their shorts.

8:40 am MT: I sold the rest of the ABT calls for a total trade of .21 cents profit or 8% gain. I’m down to two positions and still watching the “Financials Down and Oil Up” double whammy on the bulls. Still watching.....

8:55 am MT: I started nibbling back in on WHR calls at a cheaper price.

11:20 am MT: In the previous hour I picked up calls on DIA, SPY, and ADBE. I also picked up more WHR calls. The market continues to consolidate from yesterday’s big move.

1:45 pm MT: The market pushed up through the highs of yesterday during the day and looks like it will finish in the green. I will hold a few call positions overnight for another move up tomorrow. I sold some of the DIA, SPY, ADBE, and WHR calls, but I’m also keeping some for tomorrow.

I finished the day with a $1,642 profit on all closed trades. I’m still holding a partial call positions on DIA, SPY, ADBE, WHR, AMZN, and WHR. If the market takes off again tomorrow or Friday, then I’ll go in heavier with more calls.

3:30 pm MT: Market Wrap: The Dow is battling with resistance at 11,700, the SPX is battling with resistance at 1,300, and the Naz punched through resistance at 2,350 and through resistance at the top end of the channel at 2,370. The Naz may be getting to the end of the short term upswing after moving more than 100 points from the low on Monday. It’s possible that the Naz might go as far as 2,390-2,400 in the next day or two. If the Dow and SPX can take one more leg up tomorrow or Friday then I will sell the rest of my calls. The Naz is IT Bullish now, moving from the designation IT Neutral to Bullish. The overall market is IT Bullish and the Dow and SPX continue to move towards the top end of the long term channel.

Here is a chart of the Dow showing the test of the Triangle today, and then the bounce towards the first resistance at 11,700. If the Dow pushes through 11,700 then a move to 11,900-12,000 would be the most I would expect out of the current swing:
(click on image to enlarge)

Traders were probably wondering if Financials are going to whammy the market anymore. Based on the fact that the bulls climbed a wall of worry in Financials today, it looks like they think that the worst news is over for now.

SINA beat earnings expectations and is trading up after-hours. The stock may confirm a Hammer from today during the day tomorrow. It will be interesting to watch, along with the other Tech stocks on the watchlist.

Ben Jovi Leaves the Market Alone so it can Rock On

Pre-market futures are up this morning on another drop in oil prices. It won't be surprising to see many of the oil stocks that sold off yesterday gap down at the open today, which will be an opportunity to sell most of the puts in Energy left over from yesterday. Look for good intra-day setups in that sector before entering new positions. The tail-end of the heavy portion of Earnings Season is still giving us less than catastrophic results, so we have a continuation of a common theme from the past three weeks this morning.

The biggest deal today will be the Fed, although most traders are assuming a non-event. Market action will probably be somewhat quiet ahead of the announcement at 12:15 pm MT / 2:15 pm ET. So although the market will probably be quiet, and then pick up in volatility after the announcement, it probably won't be as subdued as it might have been because traders are assuming no rate change or language change and therefore are more focused on the price of oil.

Here is a recap of my trading day:

7:35 am MT: The major indexes gapped up this morning and the Dow and the SPX held the support line of the Triangle. I thought we would go tight, and that’s exactly why I unloaded my DIA and SPY puts where I did yesterday and didn’t hold them overnight.

7:40 am MT: I nibbled some calls on UNP and NSC this morning. I will probably play these as short swings. Energy stocks gapped down and jumped up right out of the gate just like I warned pre-market. So selling the gap at the open was the proper exit, now you can pick up the puts much cheaper on the bounce up.

8:25 am MT: There has been some yipping about the ISM Services driving the market today because the number was better than expected. But the number was still contractionary, and it wasn’t much different than the slightly better than expected numbers we have been seeing out of many other economic reports lately. The big deal continues to be the drop in oil prices. We have now watched $30 of speculation come off the top of oil since it hit $148 a barrel. I’m guessing that represents about half the speculation of about $50-$60 that was sitting on top of the fundamentals. Real supply and demand is probably in the neighborhood of $90-$100 per barrel. This is typical speculator behavior, which is to take some asset parabolic way beyond the fundamentals and then run screaming on fire through the night to get out when the bubble pops. In this case, I think we are experiencing a short to intermediate term compression in speculation, but not a long-term bubble bursting. I still think oil holds up and eventually bounces because we haven't changed the supply and demand equation yet.

9:35 am MT: Retail stocks are really on the move with the drop in oil prices. SHLD, TGT, KSS and others are making some real momentum moves early. Cyclicals are also doing well. I nibbled on WHR calls, but I haven’t picked up any Retail stocks yet because they ran away from me before I could jump them

9:50 am MT: Railroads took a nice jump intra-day, so I sold half the positions into the move. I will look for a pullback to build the position back. Here are the gains so far: NSC is a .43 cent profit or 9% gain so far, and UNP is a .35 cent profit or 7% gain so far.

The Dow and SPX have already made it back to the other side of the Triangle intra-day (which is easier to do the further the indexes travel into the apex). I first posted the Triangle on Friday and warned you that we would probably go tight ahead of the Fed, and so far we have done exactly that with a drop to the support line and now a jump to the resistance line. I speculate that we won’t break the triangle one way or another until after the Fed, which is also something I warned of several days ago.

10:20 am MT: WHR is getting very parabolic intra-day, so I locked the calls for a .60 cent profit or 11% gain intra-day. I will look for a pullback to get back in to the position. It never ceases to amaze me how frenetic our modern trader is. Never underestimate how much of a dog pile Maverick and Cougar and the rest of the Fast Money can create, those hot dogs just go nuts when they see something. It sure smacks of undisciplined, “get rich quick,” score the Ferrari and the Upper West Side condo, show me the money, now now now trading.....But the good news is that it means more money and faster profits for me.

10:35 am MT: I sold the rest of the UNP calls for a total trade of .40 cents in profit, or 8% gain intra-day. I kept the NSC calls so I still have some exposure to Railroads, and I will pick up the UNP calls again later on a pullback.

10:45 am MT: I sold the NSC calls for a .48 cent profit or 10% gain on the total trade. I can smell a pullback coming.

11:05 am MT: I started scaling back in to the UNP and NSC calls at a cheaper price, and I picked up WHR again. I also started nibbling in to SHLD. I like where I am so far today, we’ll see how it goes with the Fed.....

12:15 pm MT: The Fed was a non-event, back to trading calls.....

12:45 pm MT: I locked in some profits on the SHLD and WHR trades, but I’ll still revisit these for more before the close. I also picked up small call positions on CCL, ADBE, AMZN, ABT, and DHR. Those along with SHLD, WHR, NSC, and UNP will be enough for me today, although there’s a lot more going on out there. I will hold some of the positions overnight, probably parts of all of them.

1:50 pm MT: I locked down some more profits on the SHLD and WHR trades because the two stocks are fairly parabolic intra-day, especially SHLD. I’m only holding a little of those two overnight looking for an early bump to sell into. WHR is one that I will probably be in an out of a lot tomorrow, I really like how it looks. I locked in a 1.07 profit or 18% gain so far on this second WHR trade. I locked in a .50 cent profit or 10% gain on one SHLD trade that I closed, and I locked in a 1.73 profit or 23% gain so far on a second SHLD trade that I still have a small position in.

I made $532 on all closed trades today and a total of $1,265 after adding in partial locks, which I will forward to the closed trades tomorrow. So I really look at this as a $532 day with the table set for a bigger day tomorrow, especially if the market wiggles up a little and then Flags intra-day before the next move.

2:30 pm MT: Market Wrap: The Fed left the market alone, which is just what traders wanted. With Ben Jovi and the Bad Medicine Band putting their show on ice for another six weeks, the market was able to focus on what it really cares about, which is the continued drop in oil prices. Speculators have been compressed down $30 dollars of the approximately $50 dollars of fluff on top of the true fundamentals in oil. So look for the $98 - $105 area as the intermediate term support zone on the chart for Light Sweet Crude, with a possible swing down to $116 area first on the short term. If traders continue to believe that Ben Jovi is going to leave them alone for another six weeks then they won’t be Livin’ on a Prayer, and they might even Have a Nice Day. But if the Rock Star pokes his head in there too much then he could be Wanted Dead or Alive.

The Dow cracked through the resistance line of the Triangle, so you can see why I was buying calls today. The next resistance is 11,700 and then 11,750, but I speculate that the swing takes us through those levels and perhaps as far as 11,900, with 12,000 being a long shot, but possible on this swing. The SPX also broke out of its Triangle with the next resistance at 1,290 and then 1,300. Like the Dow, I speculate that the SPX may go further than that on the short term swing, perhaps as far as 1,310, with 1,320 as more of a long shot. I will take the moves one day at a time and hold only partial positions overnight because this year has been.....well.....this year.....There’s no reason to lose sight of the fact that we are still paying around $4.00 a gallon for gas, even with the compression in oil prices recently. And as soon as the economy picks up, then oil goes right back up and consumer spending softens. We (I guess that’s the royal “we”) still haven’t solved the supply issue in oil. Now if we could just turn some of that Beijing algae into alternative energy we might be on to something big.....

Bejing Algae Plagues the Olympics

Nevertheless, the market looks like it's turning from IT Neutral to IT Neutral to Bullish as the Dow and SPX channel (on the intermediate term) towards the top end of the long term channel. The Naz is ugly, and right at resistance, but at a new 30 day closing high. I speculate the Naz will punch through 2,350 and move to the top end of the intermediate term channel at 2,365-2,375 where it had the nasty gap from a Kicking Pattern at the end of June. The fact that traders continue to kill Gold (AEM, GG, ABX, NEM) like it’s made of radioactive poison lends itself to the moderate bullishness of the markets right now.

Here are the index charts:

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

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

Here is a chart of the Naz showing the index right at one resistance and then the Channel resistance at 2,365 - 2,375:
(click on image to enlarge)

Here is a list of Bullish Movers today:

Leisure/Casinos/Restaurants: CCL, MCD, WYNN, MGM, (LVS)

Retail: AMZN, RTH, WMT, SHLD, KSS, TGT

Financials: STT, COF, BK, HIG, STI, PRU, MET, NTRS, CB, (MS, PNC)

Transports: FDX, UPS

Tech: ADBE, PCLN, NIHD, IBM REIT’s: EQR, IYR, VNO

REIT's: EQR, IRY, VNO

Healthcare/Drugs/Biotechs: ABT, STJ, MDT, WLP, CELG, AET, JNJ, BAX

Railroads: NSC, BNI, UNP, CSX (I’m not looking for a higher high on UNP, so I’ll be selling into any bump up tomorrow)

Defense: LMT, GD

Cyclicals: MMM, DHR, UTX

Food & Beverage: PEP, (KO, GIS)

Consumer Staples: (PG, CL)

Note: CSCO is up strongly after-hours on a positive earnings report. The stock has jumped more than 7% in after-hours trading. Expect the Naz and the market to catch a tailwind early from the CSCO effect. I speculated earlier that the Naz would punch through 2,350, now I think it's pretty much a done deal. I will probably sell some of my ADBE calls right into any gap up, and I will probably sell my Railroads and WHR into any early bump. But I will be ready to get right back in to ADBE and WHR, along with any Tech stocks I like, on an early pullback.