12:20pm (EST)

The charts we showed you this morning highlighted the trading range the market has been in for the past 6 weeks and they can be frustrating to trade.  We have been bullish since late November and we said this rally would take the indexes to new highs by April and we have seen that.  However, as our “fluff targets” continued to expand from January into February, we realized the upside was more limited than the downside by mid-March so we have slowed our trading as we have prepared for a possible pullback.

We mentioned last Friday we weren’t ready to go short or load up on put options as there could still be some more upside ahead but trading ranges are hard to navigate and they can last for weeks and months.  The Dow has stayed within a 200-point range since early March with a little fluff to the upside while the S&P has remained in a 20-points range with the top being stretched to 1,570ish.  The Nasdaq has stayed within a 50-point range while the Russell 2000 has traded in a 20-point range but both indexes saw the bottom of their trading ranges stretched last week.

The good news is that the longer a stock or index remains in a trading range, the bigger the breakout or breakdown will be.  We just have to continue to be patient.  Trading ranges are great for covered calls as our Weekly Wrap Portfolio is now sporting a 10-1 record for 2013 but they can be tough on directional option trades as the premiums get whacked.

We have few more trades from our batches we opened in January and February to square up and we have some from March and April trades that are hanging in the balance.  Our hope is that in the next two weeks we should get a clearer picture on the next developing trend.

As we head to press, the Dow is down 52 points to 14,513 while the S&P 500 is lower by 2 points to 1,551.  The Nasdaq is declining 3 points to 3,201.

While there is much more to talk about, we do have one New Trade today and it is an earnings play on a stock we have followed for a few years.  Shares are near 52-week highs and we are expecting a breakout to blue-sky territory.  Subscribers, check the Members Area for the updates and we will be back in the morning with a full report.