BUYERS STILL FLEXING THEIR MUSCLES

The Dow was down over 130 points early in the day, but the buyers came back to close the Dow near even. It wasn't a huge bullish move (especially since the volume wasn't that great), but the indexes did manage to stay above their 10 day MA's. Since the sellers weren't able to hold their sell off, I decided to stop out of my DIA, SPY, FAZ, and TZA trades. If we do end up continuing lower, I'll look to get back into those trades. If we do start to rally, here are three stocks that I like...VHC, MYL, and PFE. WAIT UNTIL THEY SHOW A "BUY" SIGNAL. If we close lower tomorrow...especially if we close near the lows of the day, I will probably look to re-enter those trades on DIA, SPY, FAZ, and TZA. By the way....I said that I decided to stop out of those trades today. That doesn't mean that I got out with a loss. With the move down on Friday, I was able to get out of those trades today with a small profit...enough for a plane ticket and a couple of nights in Hawaii....which I could really use right about now.

NEW BLOG ADDRESS

The new blog is ready and you will need to start moving over to that new blog address. I will continue to post on both blogs, but only for a short time longer. The new blog will be free, but you will need to login to it.

AS CLOSE AS YOU CAN GET

We rallied up to 12,841 on the Dow today...just 35 points from that 12,876 high. Once it reached 12,841, it reversed and started to sell off. There was some buying at the end of the day, but the indexes still closed down. I don't know if we are going to drop here or break out from here. I could make almost an equal argument for both. All I know is that the reward to risk is fantastic right here for a bearish trade. I bought puts at the close on SPY, DIA, APOL, and MA. I bought calls on TZA and FAZ. The FAZ calls were due to the big sell off in WFC and STT. The financial stocks are looking vulnerable to another drop. The plan on these trades is to hold the bearish trades if we drop lower or stop out of them if the Dow moves above 12,876. I won't lose much if we go higher and I could make a killing if we drop lower...even if it is just an average drop. I just love that reward to risk. We'll see if the sellers can gain any strength on Friday.

12,876

This is the key level that we are watching on the Dow. If we break above 12,876 on the Dow, this uptrend will likely continue for a while. If we start to sell off, we could be in for a big trend reversal. Today looked like the start of a pull back until the buyers came in at the end of the day. We'll see how the price action looks tomorrow.

THE RALLY CONTINUES

Today was another strong day for the bulls. They managed to close the market at the highs of the day. The volume remains steady. It still looks like the market could move a bit higher for another week or so. If you want to take a chance on some bullish trades, I like CLH and KOG. Both have been outperforming the market and both appear to have completed recent corrections. For a bearish trade...look for BIDU to move lower. It will often move with Google. With Google's likely drop tomorrow, you should see BIDU move lower as well.

ARE THE BULLS TAKING CHARGE?

Today was a victory for the bulls. They managed to push the S&P 500 above 1300 and above the 1295 resistance. The Nasdaq broke above its October high. The Dow is still at that trend line, but it closed near the high of the day...and on decent volume. The weakness I saw over the last two trading sessions was erased today. I'm still not ready to fully join the bulls. If we can break above 12,876 on the Dow, I will likely jump back into the bullish camp. This doesn't mean that I won't consider any bullish trades in the near term. There is an earnings pattern that has developed over the last several months. Just about every earnings season (January, April, July, and October) has seen a bullish trend through the main reporting period. In almost every case, the earnings season rally was followed by a sell off. Some of the sell offs were pretty big. With today's move, I would expect that pattern to continue. Since we are just entering the main reporting period, that means that the uptrend could continue though the end of the month. I've joked with my classes that the minute I turn somewhat bullish is the time when the market will crash. If this ends up being true, I'll immediately start the "Opposite Jerry" blog where you trade against every prediction I make. There are plenty of reasons to remain bearish in this market, but the "price is always right"...and the price right now is going up.

THE CALM BEFORE THE STORM?

The market just finished a week where it basically did nothing. If the chart looked flatter, I'd see it as a sideways move that was setting up for a move higher. Because it hit a higher high on Tuesday and had a bearish looking day on Friday, it could be a possible reversal. We are still in that key resistance area. As we hit that area last week, I started to to look for a catalyst that would either move the market higher or push it lower. There really wasn't any major news out there until Friday afternoon. On Friday, we started to see news out of Europe with France and Italy being downgraded. We also saw some bearish news out of China. We'll see how the market reacts to these news items tomorrow. The market hasn't been following any normal patterns lately. I've talked about the weakness in the previous market leaders and some of the bearish price action that has show up on several stocks. It feels like things are about to explode lower. The problem is that it is impossible to predict exactly when the break will start. There is a quote on Wall Street that I will paraphrase since I don't remember the exact wording. It says something like "the market can sometimes stay irrational longer that you can stay solvent". I really feel like this is an irrational market. There is no way that the problems in Europe (and Asia for that matter) will have no impact (or little impact) on our economy. It is only a matter of time before we see that impact. There is a reason why I have been preaching patience for the last few weeks. It is the smart thing to do. This could be the week that something happens. Option expiration is this Friday and the markets have been quiet...too quiet. We'll see if it is the calm before the storm.