12:10pm (EST)

Out with the old, in with the new.

The Dow Jones Industrial Average is made up of 30 stocks.  From time-to-time, stocks are dropped and others added to make up 30 “blue-chips” companies.  Today’s announcement in a 3-swap deal kicks Alcoa (AA, $8.07, down $0.02), Bank of America (BAC, $14.63, up $0.15), and Hewlett-Packard (HPQ, $22.24, down $0.13) to the curb while the door opens for Goldman Sachs (GS, $164.23, up $4.74), Nike (NKE, $66.13, up $0.73) and Visa (V, $183.06, up $4.51).

The changes aren’t immediate but will take place after the close on September 20.  Since the Dow is a weighted index, Visa and Goldman Sachs will have the second and third highest weightings, respectively.  International Business Machines (IBM, $186.86, up $1.88) is still the biggest blue-chip and the changes push Caterpillar (CAT, $86.21, up $0.62) down to fourth.

We talked about IBM and CAT in the Weekly Wrap and in the Monday morning Daily.  We said to watch these 2 stocks, along with Apple (AAPL, $503.97, down $2.20) for clues of a further advance in the market.

We have another Profit Alert today and we wanted to stress the importance of chart work.  We know every trade cannot be a winner and we hate losing trades more than anything.  We strive to hit 70% or better on all of our trade recommendations that is a pretty hard success rate to achieve in options but we have done it consistently, in front of an audience, for 6 years now.

We had a trade that was down 64% coming into the month but we felt pretty good about our research and we said the bulls would rally to start September after a miserable August.  So far, so good.

The PowerShares QQQ’s (QQQ, $78.14, up $0.31) were pushing $75 coming into the month but our chart work was showing strong support at $75 and we said a rally past $78 up to $79-$80 could come.  This kept our emotions in-check and once we started to get the rebound last week, we had a good feeling we could be ringing the resister this week.

We took profits this morning and although the trade didn’t return 100% like we always target, we were able to cash in for a 21% gain.  Not bad for a month’s work.  We were in the options at 70 cents and they had traded down to a quarter before rebounding and hitting our limit price to close the trade as 85 cents this morning.  For those that bought at 25 cents, they made 200%.

We are still holding a few more call options (and a few put options) as we wait for the market’s next major trend to develop.  Remember, the recent gains have only pushed the top of the trading ranges with Tech breaking out so there are a few more confirmation signals that need to trigger before the bulls get the “all clear” sign.

We have also mentioned we are expecting a pullback to possibly start midweek but some of the dynamics are changing that appear to be bullish.  If Syria is willing to work with Russia to eliminate the chemical weapons then there is light at the end of the tunnel.  However, we have a hothead speaking tonight with a slippery tongue.

The possibility of less military action or no strike on Syria could be a game-changer and the Dow’s new buddies could provide a big lift to the index later this month as they are officially added.

The Dow is currently up 82 points to 15,145 while the S&P 500 is higher by 8 points to 1,679.  The Nasdaq is jumping 15 points to 3,722 while the Russell 2000 is advancing 5 points to 1,051 and has cleared 1,050.  This is very bullish.  The S&P 500 Volatility Index ($VIX, 14.79, down 0.84) is down 5% and is below 15.  Also bullish.

We could have New Trades this afternoon or tomorrow, depending how the headlines and the technical picture plays out so stay locked-and-loaded.  In the meantime, let’s go see where things are at with our current trades.

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