HAPPY MEMORIAL DAY

Hope everyone had a good Memorial Day weekend. We here in Utah awoke to snowfall on the mountains and early March temperatures. No barbeque this year. The market has continued its "melt up" over the last few days. The S&P futures are currently trading up quite a bit so it looks like the market will likely open up tomorrow. The key area to watch is 1344 on the S&P 500. If we move above this level, I think we can start to be more aggressive with our bullish trades. So many stocks have pulled back over the last few weeks. If we can move above 1344, I think that you can pick just about any up trending stock and make money. I still prefer spreads in this environment because I think that the upward move will be more choppy. If you don't know how to use spreads, try to buy more time on your option so that you don't get caught in time decay. Look at August or September expirations. If you do buy more time, make sure you use stops since those options will be more expensive. A move above 1344 would increase the probability for higher moves (perhaps to 1400), but not guarantee it. You still need to manage your money and manage your trade. Many of the stocks I listed last week have triggered "buy" signals. You can use some of those...although some of them have already moved pretty far like NFLX (up about $20), COG (up about $3), and VMW (up about $5).

GOOD SO FAR

The market is up strong so far during the first half of the trading day. This looks good for many of those bullish patterns that we've been waiting on. Here are some of the ones that look like they can stage a nice rally: WYNN, ALTR, NSC, APKT, IBM, FTK, VHC, MMM, BA, V, and COF. Be a bit cautious going into the weekend. The market is closed on Monday so it will be a long weekend. If this is the start of a larger bullish move, there will still be plenty of time to get in next week. No need to build a large position that you will be stressing about over the long weekend.

INTO THE CLOSE

We're 30 minutes to the close. The S&P looks like it might close above its 50 day MA. WYNN and ALTR also look like they might close above their 10 day MA. Those would be good bullish trades if everything holds into the close. Remember that a lot can happen in 30 minutes.

UPDATE

The gap down and rally this morning looked very bullish, but the market wasn't able to close at its highs. In fact, there was some selling into the close. Tomorrow could be a critical day for the bulls. The market needs to show some buying strength soon or the market will roll over and make another move down. I'd like to see the S&P 500 get back above its 50 day MA before I get more bullish. The 50 day MA is currently at 1326 and the S&P 500 closed at 1320. All eyes are on the jobless claims tomorrow. There are some great potential bullish trades out there if the bulls can get control of the market. If the market can't rally tomorrow, look for it to test that 1295 area over the next week. NFLX and VMW have done well. The other bullish trade recommendations still look good if the market can rally.

IT'S ALL ABOUT THE DOLLAR

As the dollar keeps going up, it keeps the market from having any sustained rallies. If the dollar is starting a new uptrend, it will be hard to be bullish over the next few months. In the short term, I think the dollar could rally up a bit more. In the longer term, I think it will eventually continue the trend down. It looks like it is currently in a "C" wave of a bearish ABC pattern. The selling today brought the market to a short term oversold condition. This means that the market will probably rally up a bit tomorrow. I don't know the future, so I'm not saying it will. I'm just saying that the conditions are such that it should happen soon. This could provide an opportunity for a very short term bullish trade. The smarter trade might be to wait for a rally so that you can buy puts. With the close today below the 50 day MA, the bears have shown that they are stronger than the bulls. This means that the rallies will likely be a set up for moves down. Stocks that might bounce up a bit in the next few days include LULU, CAT, NFLX, VMW, NSC, WYNN, AMZN, and AAPL.

BAD NEWS

The market continues to digest bad economic news that seems to come out daily. The good news is that the market has yet to have a massive sell off. This sideways movement of the market was somewhat expected. A few weeks ago I said that the market would likely move more choppy and sideways as we exited the April earnings season. I told you that credit spreads, debit spreads, and iron condors would work well in that type of environment. This has proven to be true....however, I was expecting more of a choppy rising trend as opposed to a choppy declining trend. The price action over the last month still looks like a correction of the uptrend and not a trend reversal. Watch the 50 day MA closely this week on the S&P 500. If we close below that average, the market will start to look more bearish. The VIX spiked up a bit on Friday which shows that the institutional investors are getting a bit worried. The market looks like it will open lower tomorrow. We'll see if the buyers can show up and reverse the selling. If they can, the market might stage a rally and those bullish picks from last week should do well. If they can't, there will likely be more selling this week. 1295 is still the major support level. We are still a ways from that level. If we drop below 1295, we'll have to seriously consider the possibility for a trend reversal...and a move down to 1250. As I've said over and over, this is not a time to get overly aggressive in the market...bullish or bearish. Be patient. The next trend will likely show itself soon.

OPPORTUNITIES?

The reversal day yesterday and the strong move today have given the bulls some hope that they can get back control of the market. I'd like the S&P 500 to get back up above 1345 before I get too bullish. Many of you have been stopped out of trades during this last week or two...me included. That is part of trading. Hopefully you were smart enough to use good money management so that it didn't hurt you too bad. If you have had a large draw down in your account, you will want to be more patient right now. Sit on the sidelines and wait until the market shows a clearer trend. For those that can still afford to take on some risk, I have a few patterns that I like. I would wait until the last half hour of the market tomorrow to enter these trades. This would give you confirmation on the strength of the bulls and likely get the S&P 500 above that 1345 level. The patterns I like are UNP (I'll thank Kathy S. for that one), NFLX, LULU, COG, and KO. There are several that are good candidates as long as they can close above their 10 day MA. Remember, it is important to wait for that confirmation. These stocks include: APKT, IBM (I'd like IBM to close above $171), ISRG, WYNN, CNI, LAD, and ALTR. That should be good for now. If the market sells off tomorrow, sit back and wait. The VIX moved down pretty strong today. That is a good sign for the bulls. We'll see if today's move jump starts a new bullish trend. Be careful though!!! I thought the same thing last week.

MARKET INDECISION

The market is going through a period of indecision or possibly a sector rotation. There were a couple of days last week where the bulls looked like they were ready to take the market higher...only to see the bears bring prices down. So far, the bears seem to be gaining the momentum. The volume on the down days has been higher than the volume on the up days. I mentioned last week that I was worried about a possible "suckers rally" or "B" wave due the the lighter volume on the rally. That seems to have played out. The drop over the last two days could be a "C" wave. If that is correct, the market should rally higher soon. If that is not correct, the market could be in for a much larger correction. That is the dilemma right now in the market. It really could go either way. The charts of the major averages look like bullish ABC patterns, but there are many warning signals that a larger correction could be underway. It looks like the institutional investors are pulling money out of technology, energy, and commodities and putting it into Consumer Staples (Coke, Pepsi, McDonalds, etc), Healthcare, and Utilities. If this is a rotation out of tech, energy, and commodities, it could seriously threaten the Bull Market. These sectors have led the Bull Market since it started in 2009. The move to more defensive positions (including Treasury bonds), signals the professional's confidence in the Bull Market might be waning. On the other hand, I haven't seen a significant spike yet on the VIX which tells me there isn't a lot of panic...not yet. That could change quickly. The bottom line is that the market really could go either way. From a trading stand point, I'd want to lighten up on my positions and make sure I had stops on any current trades. This is not a place to get too aggressive...bullish or bearish. On the bullish side, I'd want to see at least two days in a row of strong buying...with strong volume. Don't be too afraid of waiting for bullish confirmation. If the buying picks up and the uptrend continues, the S&P 500 should run up to around 1400. This would give you plenty of time to participate in that move. No need to guess it right here. If the S&P 500 drops below 1295, there will likely be easy money to be made on the downside. There would likely be a drop to at least 1250....or much lower. Be patient right now. Like I've said over and over, the market doesn't always pay us when we want to be paid. If you are patient, you can often end up making some "easy" money. If you're not, you might end up giving the market your entire trading account.

MARKET UPDATE

I've been worried about the volume over these last two days. If this is a false rally, the market should sell off tomorrow. If it holds its current gains and closes higher tomorrow, the probabilities increase that the market will end up breaking out to a new high. This latest rally has already retraced over 70% of the recent move down. Each move higher decreases the probability for another move down. Technically the S&P 500 could retrace all the way up to 1371 and still move lower, but that wouldn't represent a high probability outcome. If the market does move higher tomorrow, I'll look at LULU for a possible Bull Call Spread trade using the June 100/105 calls. The market could have some choppy moves over the next few weeks as the bulls and bears struggle for control of the market. If this happens, the use of option spreads can increase your probability for profitable trades. If you are interested in taking my Advanced Options Strategies course (Course 2) or the Elliott Wave course (Course 3), email me at jerry@myoptionmagic.com to see if I can get you a discount.

NO NEW POSITIONS

Although the market was higher today, I still don't like the volume. The volume was lighter today than yesterday...even though many stock prices went higher. This can sometimes be a signal for a false rally or a "B" wave in an ABC pattern. I'm not saying that the market is going to drop in the next few days....but if it does, it wouldn't be surprising given the lower volume numbers. I stopped out of WLT (I had a fairly tight stop), but I've held my other positions. I didn't add any new ones because of the volume divergence. If we do get a strong up day with heavier buying, I'll list more recommendations. On the trades listed last night, I tightened my stops to below Monday's lows.

COMMODITIES SHOWING LIFE

Gold, Silver, and Oil all showed life today with a snap back rally...although they did so on lower than expected volume. The bulls are trying to keep the uptrend going. The S&P 500 closed above the 1344/1345 area, but the volume was rather light. We'll see if it picks up in the next day or two. I jumped back into a few positions. Calls on WLT, ISRG, APKT, DD, CAT, and EOG. I did a few debit spreads to hedge myself a bit. I didn't like the light volume on many of the "up" moves today. I'll keep a tight stop on many of those positions. If any of these picks drop below their 50 day MA near the beginning of the session tomorrow, you might want to hold off and wait. If we get a strong buying surge tomorrow, I'll have a bigger list of stocks to jump back into. I'd stay clear of the silver trade for a few days. It is really in a position where it could go either way. If the dollar keeps strengthening, I can't see silver making another parabolic run any time soon. May tends to be a bearish month in the market year, so I will keep my eye out for signs of any possible false rally.

SUCCESS STORY

Hi Jerry; On 3-21 I bought 6 contracts of AG @ $2.45; sold 4 of those contracts on 4-4 @ $5.60. Then sold the remaining 2 contracts on 4-7 @ $7.70 Made a nice $2,310 profit. Even though AG went a little higher after this trade, I did not get greedy and took the profits - Just as you taught us in this course! Since then, I have completed the 8 week course and I'm practicing the bracket trades and have done quite well with this method. I believe in this course and thanks for being a great instructor,,,,,,,,,,, Mike ( P.S. I'm a little late reporting this, Because I juggled this 2nd half of this couse with vacation time)

FLASH CRASH?

The market is sliding into the close. Tomorrow is the anniversary of the "flash crash". Are we going to see it happen again?

IS THE UPTREND READY TO RESUME?

Like I said on Monday, it was somewhat expected that we would get a pull back in the market after so many "up" days over the last two weeks. The S&P 500 came down and tested the 1340 area which was the previous resistance. We could end up rallying off of this area and start another move up. I also wouldn't be surprised to see a bit more selling, but I still don't see any major signs of a larger correction underway. If the market can close above today's high within the next day or so, it might present a great opportunity to get back in. I haven't seen any individual stock patterns that I really like...but I also haven't had much time to look. I am seeing a lot of individual stocks that have moved below their 50 day MA. This could be a sign that there might be a bit more selling. The financials pretty much reversed the nice up day that they had yesterday. Oil and Oil services stocks also are looking weak. Remember that these sell offs over the last few months have created great buying opportunities. I wouldn't mind if it comes down a bit more.

SUCCESS STORY

i bought CAT 4.00 per contract april 5th and sold 11.20 last froday. thank you so much jerry, since i joined your mentorship program i made enough to cover my entire tuition in 2 months. you are so far the best mentor since i had several different program went thru before i come to you. i am very exciting to build up more confidence with your clear instructions. you are awesome and love your blog. christina j.

SUCCESS STORY

Jerry,

I own June options for ICO and it has been under water for several weeks. It was announced this morning that they were being acquired by ARCH coal for $2 Bil.

Thanks. What I did. Cost 209. Gain 216. 103% gain since 4-4. Yeah!

John E.

SUCCESS STORY

I bought SLV options on 4/21 for $985. Then I saw your blog about silver possibly going down and I had exceeded my goal of a 75% gain so I sold these options on 4/29 for $1876. A nice gain of $891.

I used 1/2 of the SLV gain to buy GLD options on 4/29 for $959. This buy hit my 75% gain goal this morning (5/2) so I sold it for $1725. Another nice gain of $766.

Thank you for the training and for the blog info.

Dave

SUCCESS STORY

Hey Jerry,
Just to let you know, how things are going.
From my last message, my trades were up 4%, but then it dropped down to
-7.85 ! Fear was coming, but I stuck "to the plan" and did not panic, trade went back up to +13.45% !!

Then greed was taking hold, but "professionals take profits" so I took the profits and got into
3 other trades that met the 50day and 10day confirmation, Got stopped out with two trades, one that hit my target and one that hit my stop loss.

My account went from +4.75% to -7.95% then back to +13.45%. All my decisions were made "before" I got into the trade!

Thanks again Jerry,

Your "c" student

Vance

SUCCESS STORY

Jerry

I really enjoy the postings you have from Chaz. I made $29000 in three weeks just listening to him.

Lynn

NO, I'M NOT DEAD!...BUT I FEEL LIKE I WAS CLOSE

My flu bug took a turn for the worse near the end of last week. I've spent the last few days trying to recuperate. I shut off my computer and cell phone and tried to rest. This should explain why I am a bit late in answering your emails. I'm feeling a bit better, but I am still pretty weak. I plan on holding all of my classes this week, although I still might sound a bit hoarse. I haven't been following the market since last Thursday (when I shut everything off), but the price action today looked very bearish. With the market up so many days in a row, this could be a signal that it might pull back a bit. I don't see a major correction on the horizon, but I will let you know if it starts to look more serious. With the possible threat of a new terrorist attach, a small correction could turn into a major one very quickly. This would be a good time to reduce exposure in the market. I don't think that I'll try to buy any puts on this expected pull back. The bulls have been too strong over the last few months. I'll probably wait for the pull back and then look for buying opportunities. This would fit my plan to ease my way back into the market after dealing with this flu. Just a quick note on silver (SLV)...the price action last week was getting very bearish...which was confirmed with the move down today. Silver could continue to drop, but it could also start to move wildly up and down. If it does this, it will be very difficult to trade. You will almost have to guess on what it will do next. I don't like those types of trades very much...kind of like earnings announcements. The easy money might have already been made on silver. Be very careful if you choose to continue trading it. I've seen people build nice gains during a run up only to turn around and lose it all when it comes back down. Over the next day or so, I will be posting several success stories on silver...many from my recommendation a few weeks ago. These success stories will not be a recommendation to go out and get into a silver trade right now. If I see a good trade down the road, I will post it on the blog.