12:45pm (EST)

The bears were trying to get their first weekly sweep for June but all three major indexes are surging higher as we head into the second half of trading.  The Dow and S&P 500 had their weekly win streak snapped last week but the Nasdaq has finished higher every week for the month.  Today’s rally, if it holds, will easily give the bulls the win not only for the week but for the month of June as well.

The bulls have showed some resilience this week but we have done some quick chart work to see what today’s pop means overall.  There is still a chance for a “summer rally”and there are numerous headwinds next week which could get the market over its hump or could keep the indexes range bound.  Today’s jump still has the indexes below their upper downtrend channels so we will have to see how things play out.

Nike (NKE, $87.32, down $9.57) shares are getting pounded today after missing analysts’ estimates for the first time in 2 years.  We have played Nike’s earnings in the past and we are mad at ourselves for not putting it on our Watch List this week.  We have played mostly call options over the years but we had a good feeling they were going to miss their numbers given the economic slowdown.

The company reported a profit of $549 million, or $1.17 a share, versus $594 million, or $1.24 a share, in the year ago period.  The suit-and-ties were looking for $1.37 a share.

The July 90 puts (NKE120721P00090000, $3.85, up $2.40) were at $1.45 going into yesterday’s close and are surging 166%.

We have been able to use the volatility to close 4 more winning trades this week; 3 put options and 1 call option.  The return on the call option was 464%.  The 3 put option trades returned 25%, 33% and 43%, respectively.  This brings our Track Record for 2012 to a stunning 104-21 for all of our trade recommendations.  This equates to an 83% win rate or 8 out of every 10 trades.  

We do have a few trades that are lagging following today’s rush to resistance but this is normal in choppy and range bound markets.  The July options still have 3 weeks before they expire and the August options have 49 days before they expire.  We have been quick to close winners when we can and we still believe the major indexes will test new lows over the summer.

Next week is the start of a new month and new quarter and Monday will likely be a volatile day.  The first day of June saw the market tank 2% and we have done some quick chart work to show you just how close the market is ready to test new highs or break down like a rented mule.

We have said volatility would be picking up and after smooth sailing all year long, this can make traders nervous.  We are already seeing that as many of you are writing us asking about today’s rally and why we aren’t buying call options.

Although we could get trapped on a few of our current plays, we still have PLENTY of time and we are 104-21 for a reason.  Our portfolio still has room to add call options and our Weekly Wrap trades are seeing some nice gains but it’s often best to let the smoke clear to see who is left standing.

As we head to press, the Dow is up 214 points to 12,816 while the S&P 500 is higher by 25 points to 1,353.  The Nasdaq is showing a gain of 67 points and is at 2,916. 

The charts will show us in better detail on where the indexes are at after the close so it’s too early to make any conclusions.  The last thing you want to do is panic because you feel like you are missing a move or because some of your current trades are down.

We will be back Sunday night with the Weekly Wrap which is 20-0 for the year and focuses on writing covered calls.  Make sure you check today’s chart to get a sneak peak on what the S&P 500 is looking like heading into next week.  Until then, have a great weekend everyone!