RALLY FAILS

I told you on Monday that the market was in a good position for new put option trades. I hope that some of you cashed in with the move down today. One thing to watch for is the volume on the rally days. When the sellers are strong, the market will rally up on average to lighter volume. There will also be larger than normal volume on the down days. If you look at the volume on the SPY over the last few days, you will see what I mean. The volume dropped down to average on Friday and Monday when the SPY was rallying, but it spiked back up today as the market sold off. You can also see the same pattern on the DIA and QQQQ. It wouldn't surprise be if the market rallied up a bit to retrace today's move, but it could also just continue selling off tomorrow. If you don't have any put option positions in the market, wait until the next big confirmation area to get in. That area would be a close below the 50 day MA on the S&P 500. If this happens, we could see a lot more selling. Buy puts on either a rally or a break below a support level. These would be the best entries. I still think that gold (GLD) and silver (SLV) still have more upside, but you might want to wait for either a pull back or a break above a resistance area. The GLD looks like it is breaking out to a new high and could easily make another move higher. The SLV has already broken out to a new high. Look for pull backs to its 10 day MA as buying opportunities. I don't like chasing it here, but it could easily move higher as long as the Middle East uncertainly continues. The USO (oil) also looks strong and should be bought on the dips until it starts breaking below support levels.