9:00am (EST)

The bulls rolled over on Tuesday as the bears showed some force and pushed fresh support that served as prior resistance.  The VIX also spiked and pushed resistance as the cheerleading talking heads babbled about the “selloff”.  It was hardly a selloff but it got Wall Street’s attention.

The Dow declined 119 points, or 0.7%, to close at 16,818.  The blue-chips started off sloppy but reached a high of 19,969 before fading to a low of 16,805.  The bulls held support at 16,800 but I have talked about risk to 16,600 on a close below 16,800.  Otherwise, the index still remains in track for a run at 17,000.

The S&P 500 sank a dozen points, or 0.6%, to end at 1,949.98.  The index traded to another all-time intraday high of 1,968.17 and came within a touchdown of scoring 1,975 before dropping to 1,948.  Support at 1,950 was stretched and opened the door for a test to 1,940-1,925.

The Nasdaq gave back 18 points, or 0.4%, to finish at 4,350.  Tech made another run at fresh 52-week peaks and came within spitting distance at 4,399.87.  I have talked about fluff to 4,400-4,500 and the sudden drop may have been a short-term top after the fall to 4,342.  The next 25 points could set the rest of the week and end of June trend into July.  Support is at 4,325-4,300 with resistance at 4,375-4,400.

The Russell 2000 slipped 11 points, or 1%, to settle at 1,173.  The small-caps zoomed to 1,193 shortly after the open before tanking to 1,172 and near-term support.  I mentioned a back test to 1,175-1,170 could come on a pullback and there is further help at 1,160-1,150.  A close below the latter would likely confirm a short-term top as well.

The S&P 500 Volatility Index ($VIX, 12.13, up 1.15) surged over 10% and traded to a high of 12.27.  I have warned if the bears clear 12.50, things could get volatile.  The slick-talking pros that have repeatedly said the VIX is broken took notice and may want to rethink their philosophies.

There were reports of violence overseas that could be attributed to yesterday’s weakness but those reports were unconfirmed into the close.  There are numerous other “events” happening all around the world and I mentioned hot summer months often led to zombies doing dumb things.

I have also said the market can go up on threats of war but when bullets start to fly a pullback is likely.  I hope this isn’t this case and hate writing about politics and violence but if possible highs are done triggering, instead of bailing on the market, I might have to ride shotgun with the bears for a few weeks.

The portfolio is in GREAT shape as there have been 4 call option trades closed this week – all for profits.  There are a few active put positions open but it isn’t time to back the truck up until there are further signs of weakness.

It is incredibly hard to call market tops & bottoms and especially trading ranges without doing your homework.  The charts have been a goldmine for a few years now but I put in over 100 hours a week doing the research to stay ahead of the Wall Street pros.

My Watch List is absolutely loaded with possible put option trades for July, August and September but I also have a bevy of call options I’m still watching as the entry prices become cheaper.  Hopefully, I can find another good candidate for the midday update to get into.

Heading from desk to press, futures look like this:  Dow (-24); S&P 500 (-3); Nasdaq (-8).

Closed Trades for 2014: 60-33 – the Weekly Wrap is 16-4 (80%) for 2014 (101-11, or 90% win rate, since 2011) and is designed for traders that want to use options with less risk.  All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.

Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades.  Please remember, ALL “Exit Targets” and “Stop Targets” are targets.  You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one.  I will send out a “Profit Alert” or “New Trade” if I want you to close a position OR if a new trade comes out.  Otherwise, follow instructions at all times in the 9am and 12pm-1pm updates.  Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.

 

General Motors (GM, $36.58, down $0.09)

September 32 puts (GM140920P00032000, $0.40, up $0.02)

Entry Price:  $0.40 (6/23/2014)
Exit Target:  $0.80- $1.20
Return:  0%
Stop Target:  None

Action:  I believe shares will make a dramatic back test to $30 if $36-$35 fails to hold.  There is risk to $37.50 but I am looking for $36.75-$37 to hold.  This trade has 3 months to play out and why I went with the longer-term put options.

 

BlackBerry (BBRY, $9.84, down $0.28)

August 9 calls (BBRY140816C00009000, $1.15, down $0.25)

Entry Price:  $0.45 (6/18/2014)
Exit Target:  $0.90 (closed half @ 85 cents on 6/19/14, closed quarter @ $1.40 on 6/23/14)
Return:  136%
Stop Target:  $1.05 (Stop Limit)

Action:  Shares stayed below water all session long and bottomed at $9.80.  Any further weakness today, or a drop below $9.75, will likely trigger the $1.05 Stop Limit on the remaining quarter of the trade.

 

Limelight Networks (LLNW, $2.91, down $0.12)

September 3 calls (LLNW140920C00003000, $0.35, down $0.05)

Entry Price:  $0.15 (6/4/2014)
Exit Target:  $0.45
Return:  125%
Stop Target:  None

December 3 calls (LLNW141220C00003000, $0.45, down $0.05)

Entry Price:  $0.20 (6/4/2014)
Exit Target:  $0.60
Return:  133%
Stop Target:  None

Action:  A close above $3.25 should get shares rolling again.  Support is at $2.75.

Previous comments:

Shares traded to a high of $3.25 on 6/20 after Tuition Build offered roughly $645 million, or $6.55 a share, for Limelight.  The company dismissed the Silicon Valley’s private-equity firm’s offer after basically saying they weren’t experienced enough to run the business.

I have been suggesting a buyout offer would come for Limelight Networks with the company’s cheap market cap and said they would make a very luscious takeover target.

Its litigation issues have decreased dramatically following their recent win against AKAM and they are open to a much bigger marriage.

Other 2014 Portfolio OPEN positions (2):  These are trades that are still open in the portfolio but are down over 50%.  They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around.  This means I would not open any new positions.  I’m still keeping track of the trades and will record the results accordingly, when the trade closes or if the options expire.  Click on the 2014 Portfolio link in the Members Area to view ALL open/ closed trades.

McDonald’s July 95 puts (from May 2014) – continue to hold
Apollo Group
August 23 puts (from April 2014) earnings are due out Wednesday – continue to hold