GET YOUR PUT OPTION TRADES READY

Just when you thought it was safe to buy calls...I'm now going to ruin your day. This is a perfect area to start looking at put options on the SPY. The reward to risk won't get much better. We had a sell off on the SPY in January that broke below the 50 day MA. We have recently rallied up to that 50 day MA in what looks to be a bearish ABC pattern. We are about $1 away from the 50 day MA and the 50 day MA is flat-to-slightly-downward. This is a FANTASTIC REWARD TO RISK...IT DOESN'T GET MUCH BETTER THAN THAT!!! If you don't understand what I mean, let me try to explain. If you buy your put options near this area and the SPY moves above the 50 day MA (I might even put it above the November/December resistance around $111.75), you would incur a small loss if you were stopped out. However...If the SPY drops to just the previous low on this next expected move down (around $104.75), you would have a potential $5.50 gain for the $1.50 risk. That is over a 3:1 reward to risk! How do I know the market is going down soon? I don't! I could repeat all the signals I've been following over the past week, but you can review previous blog postings for that. If this is a new trend up (instead of a correction setting up another move down), we should break above the 50 day MA soon. If we were stopped out of the put options, we could turn around and buy call options and make up the small loss within a week. As for any longer term bullish outlook...even if we do go higher, the charts say that we are still due for a larger correction (I base that on several Elliott Wave counts). If that larger correction doesn't take place now, it will probably take place soon after the market reaches a new high. In other words, the reward to risk for bullish trades is terrible right here. I understand your bullish arguments (I've received my share of e-mails this last week containing bullish arguments). I pride myself as a trader who tries to look at both arguments before making a decision. As you can tell from some of the last few postings, I've been a bit cautions to make a strong bearish recommendation. I'm going to make a strong recommendation now. I can see the possibility of a slight upward move on the SPY tomorrow (You could also use the DIA or possibly the QQQQ if you like)...maybe at the open or possibly late in the day. Maybe enough to get it right up to that 50 day MA (which is currently sitting at $110.98). If we do get this rally, look to load up on put options and place a stop above the 50 day MA. For those that may want to be a bit more conservative, use a contingent order somewhere below 108. What I plan on doing is setting up a contingent order below 109.75 if the SPY goes above Wednesday's high (around $110.40). This would trigger an initial trade. I would then add to the position if the SPY dropped below 108 (which would trigger my other contingent order). Let me be clear...I'm not setting up a contingent order below $109.75 unless the SPY goes above Wednesday's high of $110.40. This order would be a smaller initial entry into the trade which would be followed by the larger trade if the SPY drops below $108. If we sell off right at the market open, I would probably just wait for that 108 contingent order to get triggered and forget about the 109.75 contingent order. The safer trade would be to wait for some confirmation. With these contingent orders, I'm protected if the market decides to just go up 300 points tomorrow (although I will look a bit stupid with my bold recommendation). If we do rally 300 points tomorrow, I won't be in any trades so I won't care that we rallied 300 points...although if that happens, I might not have a blog entry for a week while I recover from my embarrassment (that wouldn't be the first time...and it wouldn't be the last). This could be a great opportunity for you guys to make some money and pay for your education...or possibly allow you to take additional courses...like my Elliott Wave course! By the way....look at the nice bullish ABC pattern forming on the VIX. The VIX is also sitting on its 50 day MA. If the VIX decides to spike up again, well...you know what that means for the market! For those that keep asking me about Gold...be patient. There might be an opportunity in the near future, but I still don't want to touch it right now (bullish or bearish). Keep an ear out for any negative news...especially if it involves Greece, Dubai, or even Italy. Usually a big move down needs a trigger...kind of like an avalanche. We could use a avalanche right now.