1:15pm (EST)

The market opened slightly higher this morning but the momentum hasn’t been there as trading is choppy heading into the second half.  The major indexes are all hovering near the breakeven line and failed to rally despite a better-than-expected wholesale inventories report.  Earnings have also been a pleasant surprise for some companies while a weaker dollar continues to lead the surge in commodities.     

The Commerce Department said wholesale inventories grew 1.5% in September versus a 1.2% increase in August.  Wall Street expected an increase of 0.7%.  The bulls pushed the market higher, initially, but their enthusiasm has waned for the moment.

Despite the lack of action in the market overall, there are some pockets of strength worth noting.  Silver continues to be one of the best performers sectors and we have been highlighting a few companies over the last several weeks as a way to play the continued move higher.  The metal is currently up over 4% to $28.50 an ounce and has set a new 30-year high of $28.73 in the process.

We have been pounding the table on Pan America Silver (PAAS, $36.46, up $0.05), which hit a high of $38.22 earlier today, once shares broke $30 and we listed some call options on our Watch List  a few weeks ago that have exploded.  The November 30 calls (PAAS101120C00030000, $6.10, up $0.30) hit a high of $7.40 and we had them on our Watch List for under a buck.  Although we didn’t make this an official trade, some subscribers are writing in today thanking us for profiling the trade.

After breaking out last week, the Financials stocks seem to be rebounding which is a good sign.  The Financial Select Sector SPDR (XLF, $15.37, down $0.09) jumped nearly 7% last week on news that the Fed is expected to allow strong banks to increase dividends.  A favorable yield curve has also helped the picture and commercial and industrial loan activity seem to be picking up. 

We tried going long the sector in mid-October by playing Bank of America (BAC, $12.45, down $0.15) in mid-September but bailed on the trade when shares broke below $13.  At the time, shares had been range-bound and we were looking for a breakout as it was stuck between its 50 and 200-day moving averages.

Well, instead of a breakout, we go a breakdown as shares eventually fell to a low of $11 by the end of October.  We were going to revisit this story sometime in early 2011 and we still think it’s too early to jump back in this one but we are noticing the rebound.  However, we wouldn’t get excited on Bank of America until shares break $14.

We have a lot to cover in our Members Area and we wanted to remind those of you who are new to options that you can email us anytime with your questions.  Option trading can be hard to grasp if you have never traded them and some of the quotes can look like “secret codes” as one subscriber put it.

Options are a CHEAPER way to play the market and the returns are much more powerful than trading stocks, as are the risks.  If you don’t understand options, please read our Welcome Guide inside the Members Area or you can purchase our trading manual, How to Trade options on Momentum Stocks, which walks you through the steps of understanding options and includes all upcoming videos that will cover the course.

Remember though, you don’t have to trade options as some readers use our service to play short-term moves in stocks.  Buying a stock is less risky than buying an option because options are time sensitive.  Our 3-year track record on OPTIONS is a 70% win rate which is one of the best in the industry but our stock picking skills are untouchable.  Once we initiate coverage of a stock, we normally nail the direction shares are headed. 

Keep these things in mind as you develop your own trading strategies but always remember you can email or call us if you are having trouble understanding something.

As we head to press, the Dow is down 36 points to 11,370 while the S&P 500 is off a 4 points to 1,219.  The Nasdaq is also down 4 points to 2,575.

Subscribers, check for the updates and we will be back on Wednesday morning at 9am.