We knew coming into this week the bulls were going to have a tough time breaking resistance. After 7-straight weeks of advances for the Dow, the law of averages were catching up with the index and it all seemed natural a pause would come during option expiration week. Although Tech earnings continue to come in light, economic news was pretty good today but it hasn’t helped the bulls.
The Labor Department reported claims for initial jobless benefits last week posted their biggest drop in nearly a year as unemployment benefits fell to 404,000 from 441,000 in the prior week. The 37,000 drop in claims was the biggest since last February. The suit-and-ties had expected weekly jobless claims to come in at 420,000.
Elsewhere, the National Association of Realtors said existing home sales jumped over 12% to an annual rate of 5.28 million units versus expectations for a rise to 4.85 million. However, sales fell nearly 3% from a year earlier.
And finally, the Philadelphia Fed’s index came in at 19.3 in January, down from 20.8 in December. The market was hoping for a print of least 20.
We established a number of trades towards the end of 2010 and we said last week our plan was to exit the majority of them on Tuesday because we were expecting an up day after the holiday. We had already taken profits on a few trades, but this plan worked beautifully as we have closed out 7 trades so far in 2011, including 4 yesterday. They have all been winners and the gains have been: 22%, 7%, 182%, 39%, 150%, 62% and 125% for our subscribers.
If you are NOT a current subscriber, you can easily request our track record to view all of our closed trades.
The good news about this week’s sell-off is that it is giving us an unbelievable opportunity to find some GREAT trades. We think the bulls will resume their uptrend next week and we wouldn’t be surprised to see a big rebound over the next few weeks and a break above resistance. Dow 12,000, S&P 1,300 and Nasdaq 3,000 are still on the radar.
As we head to press, the Dow is down 35 points to 11,790 while the S&P is off by 6 points to 1,276. The Nasdaq is lower by 30 points to 2,695.