WHERE IS THE VOLUME?

Another big move up...another light volume day. This is usually a strong sign of a corrective rally. That said, we still closed at the highs of the day and 90% of the S&P 500 stocks were up for the day...both of which are fairly bullish. This could mean that the rally might continue another day or so. The key is to be patient here. Don't take on a huge bearish position if the market could move up a bit more. You could buy a small bearish position in case it does start to move lower tomorrow (1 or 2 contracts for those smaller accounts...about 5 contracts for some of the larger trading accounts), but try to hold off on the bigger positions until there is a bit more confirmation. I want to wait until the market either starts selling off, or starts showing weakness in the rally...a bit more than just the light volume. Friday might be the better target day than Thursday. The market tends to sell off every time Obama starts to speak...and I doubt the market will like anything he has to say about jobs tomorrow night unless it includes some form of tax cuts. I'm speaking about what the market is looking for....I'm not trying to inject a political view. If you have a chance to look at the European markets in the morning, they will often give you a feel on how the U.S. markets will trade....not always, but definitely right now. You can view how they are trading by going to www.cnbc.com and clicking on the "Markets" tab. Then click on "Pre-Markets".

I know I'm flip flopping a bit on gold, but I'm turning more bearish again....at least in the short term. I think gold will drop to around 1700 before possibly making one more push higher. You can buy puts on the GLD and use a stop above Tuesday's high. Gold is up about $21 right now which would actually help the trade. If we gap up a bit on the GLD tomorrow, it will narrow the gap between the current price and Tuesday's high. This would increase the potential reward from a downward push and also reduce the risk of the trade by getting you closer to that Tuesday high. We'll see if things cooperate tomorrow. Silver could also drop, but that chart has been harder to read. You might notice that these would be counter trend trades. This is why I am using the previous high as a stop loss point.

If you can be patient with the trade, the FAZ is looking attractive again...for a call option trade. Much like the GLD, it would be nice if the FAZ dropped a bit more at the open in order to increase the reward and decrease the risk of the call option trade. The $52 to $53 area would be ideal. Hold off on any new trades if the market makes another strong move up tomorrow. We'll have to re-evaluate things. Anything over a 100 point move in the Dow (closing price) would cause me to sit tight for another day. If we move up strong early in the day and close well off the highs, that might be the reversal sign we are looking for.