12:40pm (EST)
It looks as though the bulls will need to send more troops.
Following yesterday’s run to the top of resistance, the bulls ran into an ambush this morning as the bears wasted no time in pushing them back.
Much of the focus has been on Italy as the yields on its debt continue to climb. Wall Street seems a little nervous that even if conditions in Italy worsen, the country’s economy is far too big to be bailed out. In fact, Italy’s economy is bigger than Greece, Portugal, Spain and Ireland – combined.
Meanwhile, Greece is close to naming a new Prime Minister and there is talk that some of Europe’s top brass want the U.S. to throw some money into the bailout kitty. We doubt that happens and if it did, we are sure the protesting here in the States would kick into second gear.
We mentioned earlier this week and last night in our video that the bears will have to go through several layers of support to change the trend and today’s selloff simply puts the market back to even for the week. Well, the indexes are slightly lower from where they started the week but we have bounced off the lows and are near even.
The Dow is currently down 258 points to 11,911 while the S&P 500 is lower by 30 points to 1,245. The Nasdaq is off by 67 points to 2,660.
Our trades are holding up well and we are on the lookout for more low hanging fruit. One point we want to make is that the next few weeks could be explosive, and there is a chance we could see a 5% move on any given day.
As we draw closer to November options expiration and as the turmoil in Europe continues to unfold, we expect there could be a blow off the roof type rally so stay strong if you are long. They say history likes to repeat itself but it doesn’t always translate to profitable trades when it comes to options. However, in 2008, the market rallied 6% on November options expiration day when we were going through our financial meltdown. Just saying.
We have drawn the line in the sand and we have mentioned key levels to watch on the downside. Until they are broken, don’t let this market fool you. The bulls aren’t done pushing.
We are also happy to report that we have closed another triple-digit winning trade today. The calls options were profiled in early September have returned 130%, overall, as we closed half at the end of October. The hard stop on the other half to protect profits was triggered this morning.
We will be back in the morning with more in-depth commentary on today’s action. Remember, the afternoon has been hot for the bulls and if they can hold support, things should be just fine. Subscribers, check the Members Area for the updates.
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