I'M BACK

I'm back...but not all the way back. I'm still really sore and it's been difficult to move around. I've been trying to rest as much as I can which means that I haven't had much time to look for trades. Almost all of the trades I listed over the last few weeks have done very well. I hope that all of you made some money. The market is still moving a bit choppy and there isn't much confidence in knowing where it is going next. The rally over the last two days has been nice, but the volume has been on the light side which normally suggests a possible suckers rally. Last Thursday looked like a bottom might have been established, but the drop on Friday and the light volume rallies this week has raised more question marks. The market has been stuck in this range between 1265 and 1295 for the last three weeks. The longer it stays in this sideways range, the higher the probability that it moves down to 1250. We'll see if it can finally move above 1300 tomorrow. Because of the light volume, I decided to do a put spread on the SPY in anticipation that this 1295 area will once again hold as resistance. I didn't wait for any confirmation which (as you know) is difficult for me to do. I'll stop out if we close above 1300...and probably set up a call spread. The trade was an SPY July 129/128 Bear Put Spread. The trade has a possible 200+% gain if the SPY is below 128 by July 15th. I'll likely just take an 80% to 100% return if I can get a decent move down over the next few days. I haven't seen too many high probability trades today, but I haven't been able to go through my normal routine. We'll see if anything stands out tomorrow. After the nice moves on the patterns listed last week, we don't want to force any bad trades and give it all back.

I SURVIVED!

I survived the surgery, but I'm not feeling very good right now...as you could imagine. I'm a little drugged up on the pain medication, but I felt compelled to try to get a posting out before tomorrow. From my very brief analysis of the market today, it looks like it could be a possible bottom. Note what I said in the last posting about having plenty of time to trade a bullish trend if it develops. Don't get overly aggressive here. There were some very nice bullish engulfing patterns on many stocks today and the volume was strong...a key part to the effectiveness of the engulfing pattern. I will list just a few that I saw. There are probably many more. Not all of these are going with the trend, but they do represent very good counter trend trades...especially since many of them are a decent distance from their 50 day MA. Those stocks are: AAPL, CMG, VMW, APKT, NFLX, WLT, CLF, LAD, AMZN, and EQIX. I also still like CAT, DE, WYNN, DD, ALTR, NSC, and EP. These are all bullish recommendations, but I will still urge you not to put too much of your capital at risk right here...and I prefer the bullish engulfing patterns for at least a short term pop. I would put stops below today's (Thursday) low on all of these stocks. If these stocks are starting a new move up, you will be able to add new positions along the way. If the sellers get back in control after today's move, look out! Things could get really ugly to the downside...but we could trade that too if that happens. Have a good weekend.

MORE SHORT COVERING

Quick note...I will be having surgery on my toe this Thursday morning so tonight will likely be my final update for this week. I'm a bit nervous because I've never had any sort of surgery before. My biggest fear is that I'll end up dying during the surgery. Can you imagine that on your tombstone...died during toe surgery? It's minor surgery so I should be okay. A small bone chip broke off my toe and has been causing some problems. Over the last three weeks, I've alternated between being mostly fine to unable to walk...all based on where that damn bone chip is. I couldn't take the "pain on", "pain off" roller coaster ride any longer. I apologize for the late cancellations of my Thursday classes due to the surgery. Keep in mind that I won't be able to answer any emails from Thursday through the weekend. I should be somewhat back to normal on Monday.

The price action today continued to look like short covering (lighter volume), but the close above 1295 does give the bulls some strength. It is still too early to tell if this is just a sucker's rally or the start of another move up. The good news is that we don't have to decide right now. There are a lot of good stocks that have pulled back over the last few weeks during the market sell off. I would love to buy calls on many of those stocks, but I can't ignore the bad economic news around the globe. If this is the start of a new move up, there should be plenty of chances to get in. For the bears, keep an eye on the 10 day exponential moving average on the S&P 500 index. If we close below the 10 day moving average within the next few days, it will likely signal that the move down to 1250 is underway. If we move above 1312, it will likely signal that the bulls are in control and a new uptrend is underway. I'm not getting into any positions ahead of my surgery, but I will post some possible bullish patterns that I like. They are AMZN, VMW, LAD, VHC, CMG, NSC, NFLX, and EP. The market move today could be part of a sucker's rally so please don't get too aggressive here. If the buyers return, there will be plenty of bullish trading opportunities. If the downtrend continues, you'll be glad that you didn't get too aggressive. Have a good weekend.

MIXED SIGNALS

The market gave out a few more mixed signals today. Things started out looking very bullish as the market began the day lower, but soon rallied up into positive territory. The SPY looked like it might end up having a bullish engulfing pattern, but it failed to close above Friday's opening price. The DIA did have a bullish engulfing pattern, but the Nasdaq was far from it. The volume today was very light...suggesting that this rally is simply a counter trend rally (retracement) and the downtrend should resume shortly. That said, I think that the price action today was strong enough to allow for another day (or two) of upward movement. We're still a decent distance away from the 50 day MA. A few more rally days could ease the oversold condition of the market and allow for another sharp move down. I still think we will hit the 1250 area on the S&P 500. It's just impossible to tell exactly when that will be. The VIX moved down quite a bit today which also suggests that we could get a few more bullish days. If you haven't been stopped out of your put option positions, you might want to consider rolling the July options out to August to give your trade more time. You could also consider stopping out and re-entering later on if you feel like the rally could go up further. To roll out your July options, you simply sell the July's and buy the August's. Same strike prices. Most platforms will allow you to do it on one order form. Keep in mind that it will cost you a bit more to buy the August options (you have to pay for the additional time). Don't roll them out unless you feel that the market will continue to move down. There is a lot of uncertainty in the market right now which is why it has mostly traded sideways for the last 6 months. I don't recommend that you try to play this recent rally with calls unless you have a lot of experience with short term trades. Some stocks like CAT and WYNN could have short term bounces. They are both good companies that are very overbought and bouncing off significant support levels. Most of you should wait to see if this rally fades, then look to buy puts for the expected move down later on. This is what I will be looking to do. Those that still have OIH puts should start to take profits on that trade. The OIH has made a pretty big move down since it was recommended a few weeks ago. Don't get too greedy. There is some support here at $140 and it could rally up a bit.

VIX SPIKE ON AN UP DAY

I've talked in past about divergences in the VIX and the market. Usually the VIX and the market move in opposite directions. When they start to move in the same direction, we need to pay attention. When the VIX rises, it usually signals an increase of fear in the marketplace...fear of a drop or sell off. This move up in the VIX usually coincides with a move down in the market. When the market moves up and the VIX moves up, it is a warning signal to distrust the rally. It doesn't mean that a drop has to take place, but it is a warning sign that there could be further selling to come. Everyone is looking at the Greece crisis and wondering how it will play out (I told you eight months ago that this problem wasn't going away). If it gets worse, it is easy to see how the market could drop further. However, if Greece gets bailed out, you can see how the market could rally very quickly as the shorts scramble to cover their positions. We have June option expiration tomorrow. In fact it is a "triple witching" expiration (stock options, index options, and futures options all expire on the same day). These days are often very volatile and almost impossible to predict. This is why I'm not going to try to predict a direction. I've often said that any expiration Friday is a good day to go golfing. Triple witching is a good day to go on a cruise. I'm still looking at the 1250 area on the S&P 500 as support. The spike today in the VIX shows that the professionals are worried that the 1250 area might not hold. Tomorrow is Friday and traders don't usually like being long going into the weekend. That said, they might not want to be short either. We did rally into the close for the first time in a long time, but I think that was mostly short covering going into the triple witching expiration tomorrow. I wouldn't recommend a new put position here, but I do think you should continue to hold your current put option positions if you have them.

SILVER UPDATE

Good evening traders. (This commentary will only be seen by Jerry McCanns followers.) I wish to start by expressing my heartfelt gratitude to Jerry for his deep compassion for my recent loss. I was stunned when I clicked on the blog and saw what he had asked of you. I am so humbled. For the rest of my life, I will count Jerry amoung the very best of my friends. I can not express my appreaciation enough to those of you who offered your condolences. I am sure that some of you wished to but didn't know what to say. Thats ok. I am grateful and my thoughts are with you. THANK YOU so much. This has really meant a lot to me....................I do NOT like this market. I suspect a lot of things but it is too much to go into and try to explain. Sometimes it is best to just sit on the sidelines and wait for a better day. I suggest we do that. I have decided to gamble slightly. I am going to exit half of my July silver put position to recover as much as possible and ride out the other half to expiration in hopes that the shorts will crash the market at the last moment. I do not reccommend this action to anyone not well funded and unable to take a heavy loss. I suggest that you clear half of your position by noon Thursday (CST). Hold the other half as a pipe dream and pray it pans out. There are only two ways to look at any market. Fundimentally and technically. I don't like either one right now. I strongly suspect massive manipulation. This remains a VERY dangerous market. I really think it would be a good idea to err to the side of caution. Happy trades....Chaz....6/15/11...11:57pm

UPDATE

Just a quick update tonight. The market rallied today, but the sellers were able to push it down a bit at the close. It also made most of its move up with the gap up at the open. This means that the gap up was mostly due to short covering and the new buyers weren't able to push prices up much after that. We could still rally up a bit more and test that 1295 resistance, but that isn't really necessary. Today's move was big enough to bounce us out of the extreme oversold condition. We could head back down soon. BAC and COF had big bearish engulfing candlestick patterns today. This is usually a strong signal that they will move down a bit further. The whole financial sector is a bit oversold, but that price action today would suggest that some of these stocks aren't done selling off...although a bearish engulfing pattern is strongest when it occurs near a high. NSC, VMW, and CNI gave buy signals today, but I'm still a bit hesitant to go bullish...at least not yet. NFLX almost gave a bullish confirmation. Keep an eye on that one.

SILVER UPDATE

This post is from Chaz...a commodities trader that writes a monthly newsletter on the precious metals market. He has given me permission to post it on my blog. As a disclaimer...I (and Option Magic) are not responsible for the content or recommendations in this newsletter. Also...a lot of this information relates to trading the actual commodities. There may be some terms or strategies that you don't recognize. This update is meant to be an information guide for those of you that are trading gold and silver...or just the gold and silver ETF's like the GLD or the SLV. This commentary is opinion and analysis. You must still use good money management and trade management principles. You must also read the charts. No one...I'll repeat...no one knows the exact future of any event on Wall Street. You must still do your due diligence. Thank you Chaz.


Hello traders. It seems we may have had an upset in the silver market. I was expecting the low to occur on this coming Thursday but I suspect the low may have been put in on Monday. This is most likely due to all the bad news coming out about our faltering economy. I'm looking at the Hong Kong market tonight and I don't see any signs of weakness. This bothers me. At this point , I am beginning to get concerned about our July puts. I was expecting the July contract to drop to about $32.15 or lower. Time value is withering. If I do not see major weakness in the next 36 hours, I intend to exit my July 36 puts for whatever I can get for them. Its possible this market could drop to as low as $29 by next week, making this a very profitable trade. But I'm a trader, not a gambler. I paid a strong premium for these puts and I don't want it to completely erode away. I would expect the shorts to hammer this market hard but they don't seem to be trying very hard. I have to ask myself "Why ?". I don't have an answer. I DO NOT TRUST THIS MARKET AT THIS TIME. Instinct and experience tell me the shorts SHOULD crash this market to $32 or below. It may be wise to exit half of your trade by noon Thursday and ride out the rest to see if it pans out. We are at a really tough crossroads right now. I will try to make commentary again tomorrow night if possible. I am keenly aware that I should have been a little more attentive to your questions the last few weeks and I ask that you please forgive my absence . My attention has been drawn to other concerns that required my immediate attention. I offer my sincerest apologies. With the kindest of regards.....happy trades........Chaz. 6/14/2011...11:57 pm

UPDATE

Thank you for messages of condolence for Chaz. If I failed to post your comments, please re-send your email so that I can get it posted. You can also just click on the "comments" link at the bottom of the blog posting. Today was a flat day in the market. We didn't get the oversold rally, but I still think that move is coming. I probably won't have any new recommendations until a see the rally....which could last a few days. You could try to trade the rally with short term day or swing trades, but I think the smarter move will be to wait for the rally and set up your put options for the next move down. I still think this market will get to 1250 soon. How it gets there will be harder to predict. Trying to predict an oversold bounce can be very tricky. This is why I told you to wait for confirmation on those bullish picks from last week. Many of those ended up dropping below their 50 day MA...especially on Friday's drop. The simple confirmation of waiting for a close above the 10 day MA should have kept you out of those trades...and prevented a loss. The move down on Friday completed a down week. This down week was somewhat predicted by the "outside week" or bearish engulfing pattern from the week before. Like I said in the blog posting several days ago, this signal doesn't necessarily predict a large move down...but it does give us a high probability for a move down. We got that last week. As far as an expectation from a bounce...I think the market could try to rally back up to 1295 and test that resistance. The SLV and OIH bearish trades still look good. Stocks don't go straight up or straight down, they stair step. For this reason, don't be surprised if these two stocks rally up a bit if the market rallies up tomorrow. You might have to show some patience.

CHAZ

Chaz,

Our thoughts and prayers are with you at this difficult time.

Our deepest sympathy,

Tom & Lucy Card

CHAZ

Hi Jerry,

Please pass on to Chaz my heartfelt condolences.

Please advise

Regards

Richard Abraham New Zealand

CHAZ

Dear Chaz;

My name is Michael Kruke. I am now nine months into Jerry's courses, and have gained the highest level of respect for him. I as well, have read and re-read all of your comments to Jerry's Blog, and am very grateful to you for having taken the time to post them. I have benefited from your insight.

I was just informed of a personal tragedy that resulted in the loss of someone very dear to you, and would like to extend my sincere condolences at this time of sorrow. Knowing from personal experience how difficult it is to lose a loved one, I hope and pray that time will pass quickly and help to heal you from the pain you are experiencing at this time.

G-d Bless

Michael

THANK YOU CHAZ

I wanted to publicly thank Chaz for his silver updates over the last 6 months. He provides these updates to us for free. He is a commodities trader who specializes in silver...a commodity in which he has occupational experience for over 25+ years. I get many questions about his newsletter so I want to clarify a few things. Chaz is trading the actual silver commodity, not the silver ETF (SLV). The price levels and contracts he refers to in his newsletter are for silver futures. If you are trying to look up the same contracts on the SLV, you might get confused when you don't find them. However, you can use the information he gives you on market conditions to place trades in the SLV. For instance, he mentions the December contracts in his newsletter, but there aren't December options available on the SLV. There are January options though, so you could use those. As you've heard Chaz and I say, there should be one more move down in silver before it could make another huge bullish run. You can trade that possible move by first buying puts on the SLV (while it finishes its correction), then longer term calls (like January) when it starts the next uptrend.

Finally...Chaz has been a good friend and a welcomed contributor to my blog. Unfortunately, Chaz has experienced a personal tragedy with the death of someone very close to him. I don't know if he would want me to bring that up in such a public forum, but I wanted to see if we could give him some support as he deals with this tragedy. He has helped several of you make money with his silver predictions over the last several months. I'd like to solicit some "thank you's" and well wishes from my 250+ followers. If you want to wish him well, please click on the "comments" link below this posting and write him a quick note. If you can't figure out how to post a comment, feel free to email me at jerry@myoptionmagic.com and I will post your comments. Thank you Chaz...and know that there are a lot of people in our group wishing you well during this tough part of your life.

SHORT COVERING?

Today's rally was expected...at least we expected that there would be a rally in the near future. The market was extremely oversold and was likely to bounce. The question is whether or not this bounce is a buying opportunity or an opportunity to buy more puts. It is too early to tell. Today's rally was likely due to short covering. When you short a stock, you borrow the shares from your broker and sell them to open the position (sell first). When the stock price goes down, you then buy back the shares to close out the position. Since we had such a big move down over the last week, the short sellers were likely closing out some of those profitable bearish positions. All that buying to close out those positions likely caused the bulk of the move up today. Will the buying continue? I think it will, but probably not until Monday. Although the market is still very oversold, I doubt that very many traders will want to buy going into the weekend. The S&P 500 is a good distance below its 50 day MA. This another possible signal for a rally. The next big support is down at the 1250 area on the S&P 500. It is still possible that the market will work its way down to that level before staging any significant rally. If we move below Wednesday's low tomorrow, you might want to look at buying some put options on the SPY. I don't think I will try to play any bullish move. I think that any rally that we have will likely set up for another move down. Once we closed below 1295, it increased the probability that we would test 1250. If we do rally up tomorrow, here are some bullish patterns that you can consider for trades. Many of these need confirmation...like a close above their 10 day moving average. CMG was a put option recommendation from last week. If you traded it, you did very well. Now that it is at its 50 day MA, you could look to trade a call option on the stock IF it closes back above its 10 day MA within the next week or so. Other bullish patterns include NSC, VMW, LAD, CNI, JNJ, KFT, MRK, TRV, and AMZN.

RALLIES ARE BEING SOLD

Today's rally faded into the close as the sellers were able to flex their muscles. Now that the market has broken below 1295, it should make its way down to 1250. The market is a bit oversold so it could stage a short rally within the next day or two, but ultimately it should finish the week lower....unless some incredibly positive news comes out. If you got into some puts last Friday, you should be doing okay on your positions. Silver (SLV) hasn't cooperated yet, but the price action over the last two days has been a bit bearish. Although the overall price has moved higher on both days, the price movement hasn't been strong. Both days saw the price gap up at the open, then fade to close lower than that opening price. This shows that the sellers have still been able to push the price down during the trading day. The 5/31/11 high will be the key area to watch. This current rally should not go above that high. If it does, silver could continue to move up to $40 or $41. The VIX dropped today despite the market being down a bit which shows more complacency from the professionals. This tells me that the institutional investors likely believe that there is a support level in this area and the market should stabilize and move up again...that they don't need to run out and buy more protective puts on their positions. The institutional investors aren't always right, but I do respect the fact that they probably know more about what's going on behind the scenes than I do. It's one thing to see them stop selling, it's another thing to see them actively buying. Until I see that, I'll still look for the market to move lower.

Gold and Silver Update

This post is from Chaz...a commodities trader that writes a monthly newsletter on the precious metals market. He has given me permission to post it on my blog. As a disclaimer...I (and Option Magic) are not responsible for the content or recommendations in this newsletter. Also...a lot of this information relates to trading the actual commodities. There may be some terms or strategies that you don't recognize. This update is meant to be an information guide for those of you that are trading gold and silver...or just the gold and silver ETF's like the GLD or the SLV. This commentary is opinion and analysis. You must still use good money management and trade management principles. You must also read the charts. No one...I'll repeat...no one knows the exact future of any event on Wall Street. You must still do your due diligence. Thank you Chaz.


Hello traders. This update is a little late. My apologies for that. Just to much going on lately. Last time, I warned you about this being a dangerous market. Looks like I hit that one dead on. I made money in it because I was playing both sides of it. I warned you not to follow me into this market and I hope most of you took that advice. If you are still holding July calls, you might want to seriously consider getting out as it does not appear these calls are going to pay off. Especially since we have triple witch bearing down on us in a few weeks. Markets only move in three directions. Up , down and sideways. NO ONE can tell you which direction a market is GOING to move but it is possible to determine which direction a market is MOST LIKELY to move. That is what we do here. If you have never lost money in the markets, then you've not been trading them. If you are afraid of losing money in the market, then you don't belong here. Get out now and go open a savings acct like your parents told you to. Commodity trading is not for the faint of heart. If you have the courage and do your homework carefully, there is a good chance you can change your life. I know that for a fact. It changed mine. Here are two thoughts from my own experience for you to consider. I once lost $50,000.00 in a single day. I also once made $10,000.00 in just 10 minutes. If I had had as many positions in my winning trade as I had in my losing trade, I would have made over $2,500,000.00 in just 10 minutes. This happened years ago when I was trading contracts. Fortunately I came to my sense's before it was too late so I no longer trade contracts. I trade options only. I strongly recommend you do the same if you still have the courage to trade. Ok, lecture is over. ......I have exited all July calls. Looking at September, I'm not getting a warm fuzzy. However, December is making me think I'm in love again. It's giving me wonderful fantasies........Nope , I'm not going there. Lol. ......OK, this is what I'm looking at. Silver has corrected as low as $32.15 which is exactly where I said it needed to go in last months commentary. However , there is still that annoying little gap at $29. GAPS ARE MADE TO BE FILLED!!!.....I don't know if this one will be but I want to err to the side of caution. I started to send a notice out a few weeks ago that I thought silver would probably trade in a channel between $29 and $39. I regret not sending that notice out because it has done exactly that. Had I been more diligent , I might have been able to prevent some possible loses to some of you. My apologies for that. But wake up and smell the coffee here.....It is NOT my intent to hold your hand and tell you how to make money in commodities but rather to TEACH you how to learn to trade by looking over my shoulder and seeing what I see. Mistakes WILL be made. Loses WILL incur. Hmm, I think I'm lecturing again. .... Back to the markets.... I think it is likely silver will continue to trade sideways till triple witch is over in a few weeks. I don't look for much to happen. After that, well , they don't call summertime Silly Season for nothing. Summer trading is always erratic. Anything can and often will happen. I KNOW a monster move is coming soon but I don't see it happening this summer. That's why September calls are not giving me a warm fuzzy. HOWEVER, after the September expiration, I'm pretty sure we are going to see large and rapid movement. A few weeks ago, I started placing orders for the Dec 40 calls. I have acquired a few and still have orders pending. I had to pay a fortune to get them. I still have orders pending and hope to get a lot more. It is a VERY cold day in hell when I buy an option that is more than 90 to 120 days out but in this case I believe this strike is going to pay off in spades. If we continue with this correction down to $29 , it may be possible to acquire the Dec 40s below $10,000.00 each. IF someone is dumb enough to believe this market is out of steam and decides to offer them. ....Ok, here's where I put my head on the chopping block. I KNOW we will be over $50 by November. I BELIEVE we will be closer to $60. I THINK we could be as high as $80 on an intra day move. I SUSPECT $100 is possible. Not to hold but to reach on a wild trading day. A few months ago, I told you we would soon see one dollar moves in a single day and then moves approaching five dollars in a single day. This has come to pass and is now history. Now I am telling you that we may see moves this fall ranging from $5 to as much as $10 in a single day. There are no daily limits in the metals markets. Moves like this can give a contract trader a heart attack. Seriously. Don't be tempted. If you are going to trade, trade options only. Or buy physical and hold it. Physical holders...DO NOT SELL ANYTHING unless you have no choice and must have the money. The price of silver next spring is going to blow your mind. Ok, it's late, I'm tired and I'm done rambling for now. I'll try to make comment around triple witch. By then , we should have a better idea of what is likely in the late summer. Happy trades.......Chaz...Saturday, June 4,2011

OUTSIDE WEEK?

I don't have much time tonight to explain the "Outside Week" or bearish engulfing pattern on the weekly chart. You can read my blog posting last June 28, 2010 which explains it. If the Dow and S&P 500 close tomorrow at or lower than today's close, we will have this bearish "Outside Week" pattern (It is basically a bearish engulfing candlestick pattern). This would mean that there is a very good chance that the market would trade even lower next week. This pattern sometimes precedes big moves down in the market and it sometimes precedes little moves down in the market...but it usually means a move down! If we get that confirmation tomorrow, you might want to place a few put option trades going into the close. A few. Don't get crazy or risk too much...especially going into a weekend. I still like puts on SLV and OIH. You could even add puts on DIA, SPY, or QQQ if the market closes lower. By the way, you can place option trades on the DIA, SPY, and QQQ up to 15 minutes after the market closes.

WELL...WE WERE WAITING FOR A BIG MOVE

I've been saying for weeks that the bulls and bears are wrestling for control of the market. This is what has caused so much back and forth movement. I told you that the smartest thing to do was to wait until the market gave you a clearer direction on where it wanted to go next. Today might have been that day. I mentioned last night how much bearish price action existed in the market yesterday. Today we saw the reason for that bearish price action. The sell off was big and it was broad. It's been a while since I have seen so much red on my watchlists. The only thing green were my inverse ETF's (which go up when the market goes down). There are several reasons to believe that the selling hasn't stopped. First, that was a big move down...and the volume was decent. Second, the market closed at the lows of the day which tells me that there weren't any buyers at the close. Third, the VIX spiked up pretty high after sitting on that historically low level of 15...I'm glad I had those VIX calls to protect my bullish positions. Lastly, there isn't a QE3 out there to provide a safety net. I'm not ready to call for a crash. There are still a few scenarios out there that show the possibility of the market going higher down the road...but in the short term, I think we will test 1295 on the S&P 500. With the troubles in Europe likely to continue, I like this "pair" trade...puts on the FXE and calls on the UUP. It looks like the dollar (UUP) could rally and the Euro (FXE) could drop. Both charts look like they are making trend reversals. I'm still waiting for this trade. I want to see the FXE drop below its 10 day MA and I'd like to see the UUP move above both its 50 day MA and 10 day MA. I like the September options on this one because it could be a longer term trend...and the options are fairly inexpensive. If the dollar does start to rise again, it will put more pressure on commodities (oil, gold, silver, etc.). I think I'm ready to call for puts on the SLV. The chart looks like it is ready for another move down...or at least a move down to $32. I'm also looking at puts on the OIH. I'm looking for just a modest move down to $144 for now.

SUCCESS STORY

Jerry,
I attended your Option spreads and Elliot wave courses (along with the first course) a few months ago and I wanted to give you an update. First of all, you are a genius! It made a big difference when I combined the trends with the Elliot Wave. It's incredible. As i've told you, i've studied it a bit andI don't think I've ever seen anyone teach Elliot Wave that way . I've made over $26,000 over the last few months. That's a long way from what I started with. I've been mostly using debit spreads and trading the wave 3 or C pattern you taught us in the Elliot Wave class. Some Iron Condors, but I'm still getting used to those. Can you send me your current Elliot wave count? You nailed it almost dead on last year at this time. Thanks. Your friend, Eric M. in Orlando.

TODAY WAS WEIRD

What a strange day in the market. I know that I told you that you could be a bit more aggressive if we closed above 1344, but the price action today on most stocks was very bearish despite the 100+ rally in the Dow. Most stocks gapped up at the open, then sold off through most of the day before closing either near the opening price or lower than the open. Read this next sentence slowly because it explains a very bearish price action. When a stock gaps up, then sells off to close lower for the day, but the closing price is still higher than the close the day before, it represents a warning that a sell off may be coming soon (I hope that sentence made sense...you English majors can let me know. It's late). We saw this on the silver chart (SLV) on 4/25/11...about 5 days before the crash. This price action does not mean there will be a crash, but it is a warning that there could be some selling in the future. Although the S&P 500 closed above that 1344 mark today (and it only did so on a 20 minute rally at the end of the day), I'm still going to be a bit cautious due the the bearish looking charts of so many individual stocks. VMW, LAD, CNI, WYNN, COG, EP, WLT, EOG, CAT, USO, HESS, etc.....I could go on and on. Notice how most of those stocks were in the energy sector. This could be an early warning sign for a sell off in that sector. This price pattern does not guarantee a drop so don't go out and short everything in sight. More than anything, it might just be telling us to wait a bit longer before getting too aggressive on the bullish side...especially in the energy sector. There were some good moves today like NFLX, ALTR, VHC, and APKT. If the market does end up selling off a bit, a good counter trend trade would be CMG. It had a bearish engulfing candlestick price pattern today. Although the current trend is up, the price action today suggests that it could pull back a bit over the next few days...perhaps $10 to $15 or more. I'd buy the put or put spread and place a stop above today's high. Sorry that I didn't have more good news today for you bulls that were waiting for the break above 1344. Who knows...in this market...we could have another weird day tomorrow as well and I could flip flop again.