1:20pm (EST)
It’s been amazing to see the numbers of bears switching sides and Barron’s call for Dow 15,000 wasn’t too surprising, maybe somebody over there is doing some real homework for once.
Although we don’t do CNBC interviews, we’re sure they would have loved to have spoken to us back in December when we said the Dow would move 1,000 points and hit 12,800 in January.
We keep notes up at the office so that we can try to stay ahead of the market and that we have a clear plan in front of us for months and not just days or weeks. This helps keep our emotions in check and here have been our thoughts over the past 2 months:
From December 14, 2011 with the Dow at 11,823:
“We have been building our Watch List with both calls and puts and we are looking at January, February, April and June options. There is still a massive move coming and we will see the Dow at 11,000 or 13,000 come the end of January. We are still favoring calls because we are still bullish and the put options have gotten EXPENSIVE which is another reason we have sat on the sidelines.
We said in early November when the market reached resistance we could have a pullback and since then we have been in a 4-week trading range. This is exactly how the market acted in July and August before the huge rally back to the top.” (END)
From December 19, 2011 with the Dow at 11,766:
“There are 5 trading sessions left before Christmas is here and the market is closed next Monday. This means there are only 9 days left before the end of 2011. For you historian buffs, the market hasn’t had a losing pre-election year since 1939 so the bulls will be motivated to keep this streak alive. The other indexes have a little work to do but we saw some encouraging signs last week that still have us “bullish”. (END)
From our 12/26/2011 Weekly Wrap with the Dow at 12,294:
“We wanted to show the longer-term WEEKLY chart of the S&P Volatility Index (^VIX, 20.73, down 0.43) after we called the drop to 22.5 back in October. We said a couple of weeks ago the VIX appeared to be “decoupling” from Europe’s mess and the talking heads echoed the same thing last week which was old news. We also mentioned the VIX could fall into the teens with a rally thru January and we talked about how February is normally a bearish month. The bulls are safe for now but a decline in the market and a rising VIX above 25 would be early clues a pullback is coming.” (END)
We could include January but you get the picture. February always makes us nervous but our notes from December have been golden. We said to stay long thru January and last week was the first full week of February and we got the pullback.
We said yesterday the market could go “either way” this week and it will depend on what the European Union does with Greece. By no means is this a slam dunk for the country to get a second bailout and we don’t have to push things because our current trades are doing well, we have locked in half positions, and we have used longer-dated options to allow for some February “choppiness”.
We recently updated our longer-term targets for the Dow, S&P 500, and Nasdaq which we said won’t be achieved until our current upper-end targets are reached. After a couple weeks of testing, the indexes are right there and this could be the week we break through. However, if the bulls continue to struggle with resistance, expect a pullback before a strong rally resumes.
As we head to press, the Dow is down double-nickels, or 55 points, to 12,819 while the S&P is lower by 7 points to 1,344. The Nasdaq is off by 17 points to 2,913.
We have a lot to talk about inside our Members Area, including some thoughts on Zynga (ZNGA, $14.19, up $0.77), which announces earnings after the close. Our current trade is up 183% and we have already locked-in half profits so let’s go see how we play the other half. Subscribers, check for the updates and make sure you use limit orders for our NEW TRADE.
