COULD COAL MOVE DOWN?

The market traded sideways for most of the day before making a late session rally. The S&P 500 is sitting right at 1150. This was the resistance I have been talking about over the last few days. That late session rally is considered bullish although the volume was low again today so it's hard to tell just how significant the rally was. If we do end up selling off soon, there is a bearish pattern that I like (thanks to Howard M.). The pattern is JRCC. The trend is down and the stock just moved back below its 50 day MA. There appears to be a nice bearish ABC pattern that might have completed. That possible bearish ABC pattern has retraced the previous move down by about 50%. The reward to risk is very good. I would have a pretty tight stop somewhere above the 3/8/10 high. The initial downside target would be around $15.50 to $15. There are many other coal stocks that have possible bearish ABC patterns completing, but many of their trends are still considered up. I liked the pattern on JRCC best. The Nasdaq market has already moved to a new 52 week high, the S&P 500 is right at a 52 week high, and the DOW is just over 100 points away from a 52 week high. I'll be keeping a close eye on the market tomorrow to see if it can follow through on that late session rally...or if these bearish patterns in Gold and Coal can really start to pay off.

SUCCESS STORY

Jerry,

I bought 100 contracts of the IP 24 April calls at 1.55 based on Shanes Option pick

I put in an order to sell them at 2.10 today.

Profit of $5315.00

Success story. Real trade Today

I bought 50 contracts of NOK April 13 calls a few weeks ago ( Feb 18th ) for
.89 cents and sold them today for 1.61 with a profit of $ 3454.91 or 57% in less than one month

Today's Paper Trade

Sold 100 contracts of AIG March 40 dollar calls for 13,400.00

and bought them back 1 hour later for 9100.00

Profit of $ 4300.00 dollars

Looking forward to tonights class.

Richard R.

WEAKNESS AHEAD?

The market showed some weakness as it neared the 1150 area on the S&P 500. That possible resistance would need some confirmation, but it could be an early signal of an upcoming sell off...or a pause before a breakout rally. The price action in the DOW and S&P 500 over the last three days shows that the sellers might be starting to gain some strength. We should know the answer tomorrow. Gold sold off pretty good after being up in the early part of the day. The put option recommendations on GFI and GLD look pretty good so far. I also like FCX as a possible put option trade if the stock price can close below $77.50. They key here is a closing price below $77.50. That price level is important confirmation for the bearish trade. If a put option is purchased before that confirmation, it would significantly increase the risk in the position...many of you learned that from the put option recommendation on the SPY a few weeks back. We wanted to get in if it dropped below 106. We never got that confirmation which should have prevented us from losing money in that trade. Today's price action on the VIX was bullish...which of course could be bearish for the market. Keep a close eye on that indicator. If it starts to spike up, we want to be prepared to buy puts on the SPY or DIA and profit from a potential move down. If the S&P 500 breaks out above 1150 tomorrow, we want to keep an eye on the volume numbers to see if the volume increases significantly. If it does, we might want to look for some call option trades that we can get into.

NOT MUCH TO ADD

I haven't posted anything for the last few days, but it's because not much has changed. The volume is still very light. If the market can push through 1150 on the S&P 500, I might start to have more confidence in the rally. Today (Wednesday) is the 1 year anniversary of the 379 point move that kicked off this latest bull market. We are also coming up on the 1 year anniversary of this blog (March 23rd). I'm starting to see some bearish price action on gold. One of the most bearish patterns is on GFI. With a fairly tight stop, many of the potential trades had at least a 2:1 reward to risk. The GLD also had some bearish price action, but the price is currently still above its 50 day MA. I'm not looking for a major move down in gold, but it could have a shorter term sell off. The downside target on GLD is around $106.75. For GFI, it is around $11. Keep an eye on the VIX. It is sitting at a historically low level. There is strong support around 17. If you combine the VIX with the fact that the S&P 500 is reaching the resistance level of 1150, you can see the potential for an upcoming bearish move. No, I'm not going to predict another bearish move. I've already made one bad call with the last prediction. I will say that these are the conditions that often proceed a bearish move.

JOBS REPORT TOMORROW

The market had moved a bit sideways the last few days due in part to the anticipation of the jobs report due out Friday morning. I don't think it will have a major impact on the market unless it is very negative. The market seems to want to go up for now. I am remaining neutral and willing to sit on my hands for another week if I need to. I had a virus last Wednesday and needed to cancel some classes...my computer had a virus this Wednesday and I also needed to cancel a few classes. Hopefully all these viruses are gone and we can get back to business. Maybe this is a hint for me to start looking at the Biotech and Pharmaceutical sectors again. I really haven't traded them for over a year. Hold off on those financial stocks I told you to watch from the last posting. Many of them would need to drop back below their 50 day MA in order to be considered for a bearish trade. Have a great weekend.

NO CHANGE

Today's price action in the market was bearish, but not enough to move my outlook from neutral. The volume is still very light which is a big reason why I haven't turned bullish during this latest move. Some of you might feel frustrated that you missed a bullish run. Don't feel that way. There will be plenty of opportunities to make money in the market this year. Keep an eye on GS, MS, AXP, and COF. Wait until they drop below their 10 day MA for confirmation. They are all at a key resistance level and their 50 day MA's are all trending downward.

MOVING TO NEUTRAL

Thank you for the "get well soon" e-mails last week. I am feeling a lot better. The market continues to rally despite my bearish outlook. We clearly moved above the 50 day MA with today's move and we are testing the 1117 resistance level. As the market keeps breaking above these resistance levels, it is exhibiting the behavior of an uptrend. Since the 50 day MA is not yet trending upward, I will take a more neutral stance. This means that I won't be looking at bearish positions unless we drop back down below the 50 day MA. I also won't be looking at bullish positions unless the 50 day MA starts to trend upward. This doesn't necessarily mean I won't make any trades, but that this is not a highly probable area for either bullish or bearish trades. I was stopped out of my put option trade on the SPY. As I mentioned in an earlier posting, I don't see much upside potential compared to the downside potential. Be ready to enter put option trades if the SPY dips back below the 50 day MA. For those that are a bit more cautious (like me), you could set up a contingent order below 110 on the SPY. The lighter than normal volume on this latest rally should reinforce the need to be cautious. I still like the bearish patterns on GS, MS, AXP, and COF. They haven't really participated in the recent rally in the market. I also like FCX as a potential bearish trade. Today's price action was bearish and it is sitting just under its 50 day MA (which is trending downward).