MONDAY'S OUTLOOK

Mondays have tended to be bullish days for most of 2010. It is possible that we might get a short term rally. At the time of this posting, things still look pretty negative around the world which could lead to more selling on Monday. What I'm trying to say is that we are still expecting the market to move lower, but we might get a short term rally along the way. These rallies are great opportunities to buy puts. I will look at any rally as a put option buying opportunity unless the rally brings us above last Wednesday's high (around 1116 on the S&P 500). I still like the bearish patterns I listed on the blog last week. Of the three index ETF's (SPY, DIA, and QQQQ), I like the QQQQ the most. It has shown the stronger weakness early on in this sell off. Buy plenty of time. October expiration would be a nice target. On the index ETF's, you can also try using the Quarterly expiration options. The Q3 options on the DIA, SPY, or QQQQ expire at the end of September. This gives you an expiration date between the September expiration (9/17/10) and the October expiration (10/15/10). Don't use September options unless you plan on being in the trade for less than a week. For some bullish trades, I like calls on the TLT (although it could pull back a bit before going higher). Either wait for the breakout above about $102.50, or wait for a small pullback. You can also try calls on the TZA. The TZA is a leveraged inverse ETF for small cap stocks. These leveraged ETF's should only be used for shorter term trades (less that 2 months). Last week looks like an "Outside Week". You can read an explanation of this pattern on the June 28th posting. If last week did complete an Outside Week, we should get some heavy selling sometime this week. The last time it did this was on 6/25/10. That next Monday (6/28/10) was down a fraction, but the next day (Tuesday) we were down 268 points on the Dow. We'll see what happens this time around.