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"C" WAVE?
We did end up getting a rally and I did end up stopping out of most of my bearish positions when we moved above 1068. The more I look at today's big move, the more it looks like a wave C of a bearish ABC pattern. The move up today was done on relatively average volume. This tells me that there was a lot of short covering today. The fact that the main 
thrust up in the market took place over the first 45 minutes tells me that there was definitely a short squeeze. This doesn't mean that we can't have some follow through over the next couple of days. There are often big upward moves within bear markets. The key is to watch the volume. If we keep moving up and the volume increases above average, there is a good chance that there are new buyers entering the market. That would be bullish. If we start to sell off again and the volume increases above average, it could lead to another big move down. I've talked about the similarities between the summer of 2008 and this year. I've now started to see other websites start talking about those same similarities. I think the market could be up a bit or flat over the next two days going into the Labor Day weekend. If we are up tomorrow, there could be a chance that the market starts to move down after the jobs report on Friday. Right now my thinking is that we won't have a big move down this week. As I mentioned yesterday, I think that more volume will enter the market next week...after the holiday. I don't recommend getting into new call option positions. If you entered into any today, you might want to set some stops below about 1065. This is also the area where you should consider getting back into your put positions. For those that might have been beat up by the market over the last few weeks, you might want to just sit out until we get the first significant sell off. Once we get that first big move down, we should get other opportunities to get in. I set up a few Straddle and Strangle trades near the market close today. This is a strategy that I teach in the Advanced Options Strategies course (Course 2). If you are interested in taking that course (and you haven't already purchased it), please let me know...jerry@myoptionmagic.com. These trades were more of a defensive move. I wanted to have my put option positions without losing my shirt if the market continued to rally. If we rally higher, I'll just hold onto the positions and basically have a neutral trade. If there are signs that this could be the start of a new uptrend, I'll be happy to sell the puts and hang on to the calls. If we start to sell off, especially if we move back below 1065, I'll sell the calls and hang on to the puts. I need to make something clear. I'm not remaining bearish because I feel the need to defend a position that I've had over the last few months. I'm bearish because the charts are telling me to remain bearish. If that changes, I'll be more than happy to flip flop and start trading calls. You can look at the history of this blog. All the entries are archived. I was bullish in March of 2009 when everyone else was saying that the market was going lower. I was set up with bullish positions before we had those big moves up in March of that year. On CNBC today, almost everyone was saying that you need to start buying stocks. Sometimes its hard to go against that crowd. My job is to try to help you make money. If I see anything in the next few days that leads me to believe the trend will turn up, I'll post it on the blog. If you look at the S&P 500 over the last 5 months, you will see a big move down from the April high to the May low (you can even use the July 1st low). From May to the present, the market has basically moved sideways between 1131 on the upside and 1040 on the d
ownside. 1040 has been a very strong support area. If you want to know why it has been difficult to make money over the last few months, it is because the market has basically moved sideways. When the market moves sideways, it is very difficult to make money buying call or puts. Spread trades usually work best in those conditions which is why I've tried to incorporate many of those strategies into my trades. Remember what I taught you about ABC patterns. When the stock (or market in this case) is moving sideways, the higher probability future move is in the direction of the previous trend. The last previous major trend was down (April 26th to May 25th...or you could use July 1st). This means that the next probable move for the market is down. Notice how I said probable. There are also many Elliott Wave reasons to believe we are going lower, but I don't have time to mention them here. Besides, I want you to take my Elliott Wave course...email me if you are interested.
thrust up in the market took place over the first 45 minutes tells me that there was definitely a short squeeze. This doesn't mean that we can't have some follow through over the next couple of days. There are often big upward moves within bear markets. The key is to watch the volume. If we keep moving up and the volume increases above average, there is a good chance that there are new buyers entering the market. That would be bullish. If we start to sell off again and the volume increases above average, it could lead to another big move down. I've talked about the similarities between the summer of 2008 and this year. I've now started to see other websites start talking about those same similarities. I think the market could be up a bit or flat over the next two days going into the Labor Day weekend. If we are up tomorrow, there could be a chance that the market starts to move down after the jobs report on Friday. Right now my thinking is that we won't have a big move down this week. As I mentioned yesterday, I think that more volume will enter the market next week...after the holiday. I don't recommend getting into new call option positions. If you entered into any today, you might want to set some stops below about 1065. This is also the area where you should consider getting back into your put positions. For those that might have been beat up by the market over the last few weeks, you might want to just sit out until we get the first significant sell off. Once we get that first big move down, we should get other opportunities to get in. I set up a few Straddle and Strangle trades near the market close today. This is a strategy that I teach in the Advanced Options Strategies course (Course 2). If you are interested in taking that course (and you haven't already purchased it), please let me know...jerry@myoptionmagic.com. These trades were more of a defensive move. I wanted to have my put option positions without losing my shirt if the market continued to rally. If we rally higher, I'll just hold onto the positions and basically have a neutral trade. If there are signs that this could be the start of a new uptrend, I'll be happy to sell the puts and hang on to the calls. If we start to sell off, especially if we move back below 1065, I'll sell the calls and hang on to the puts. I need to make something clear. I'm not remaining bearish because I feel the need to defend a position that I've had over the last few months. I'm bearish because the charts are telling me to remain bearish. If that changes, I'll be more than happy to flip flop and start trading calls. You can look at the history of this blog. All the entries are archived. I was bullish in March of 2009 when everyone else was saying that the market was going lower. I was set up with bullish positions before we had those big moves up in March of that year. On CNBC today, almost everyone was saying that you need to start buying stocks. Sometimes its hard to go against that crowd. My job is to try to help you make money. If I see anything in the next few days that leads me to believe the trend will turn up, I'll post it on the blog. If you look at the S&P 500 over the last 5 months, you will see a big move down from the April high to the May low (you can even use the July 1st low). From May to the present, the market has basically moved sideways between 1131 on the upside and 1040 on the d
ownside. 1040 has been a very strong support area. If you want to know why it has been difficult to make money over the last few months, it is because the market has basically moved sideways. When the market moves sideways, it is very difficult to make money buying call or puts. Spread trades usually work best in those conditions which is why I've tried to incorporate many of those strategies into my trades. Remember what I taught you about ABC patterns. When the stock (or market in this case) is moving sideways, the higher probability future move is in the direction of the previous trend. The last previous major trend was down (April 26th to May 25th...or you could use July 1st). This means that the next probable move for the market is down. Notice how I said probable. There are also many Elliott Wave reasons to believe we are going lower, but I don't have time to mention them here. Besides, I want you to take my Elliott Wave course...email me if you are interested.
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