1:25pm (EST)
Futures were pointing towards a lower start on Wall Street when the European markets opened for trading this morning following comments from European Central Bank chief Mario Draghi and the death of North Korean leader Kim Jong-il. Repeating the obvious, Dragi said the “agreement” at the European Union (EU) summit a few weeks ago was essential for resolving the region’s debt crisis and that the economic outlook for the region was uncertain, with substantial downside risks. He went on to say that a “silver bullet” outcome was unrealistic but also added the EU summit did more than what the markets are reflecting.
The death of Kim Jong-il wasn’t too much of a shock, considering his health, but the market is a little worried over the leadership of Kim Jong-un, his youngest son and his successor, who may have to “prove himself” to the military.
The market brushed back these worries following a positive NAHB Housing Market Index report. The NAHB reading of 21 was higher than the previous month’s level and 2 points ahead of forecasts. The bulls opened the session higher but were unable to hold the upside momentum as we head into the second half of trading.
The market is near session lows but support is holding once again. The good news is that while we chop around in this trading range, there are a lot of stocks on the verge of breaking down, or, they are bottoming and are ready to turn back up on the next rally.
We know the current range has been hard to sit through because as option traders, we love action. We normally average 2-3 trades per week but this is all we have opened for the MONTH of December. We often try to trade these ranges but most of the times you can get mixed results and at best, you will break even. We have seen numerous trading ranges like the current environment throughout 2011 and 2010 was even worse.
They say it’s hard to teach an old dog, new tricks, but we have learned not to push things when the market is in a funk. We have been building our Watch List to play the market’s next big more, which we still think is bullish, but we have listed both calls and puts in case there is a breakdown. Many of the stocks we are following are showing some of the same chart patterns as the indexes and we have outlined key technical areas to watch for. Until those are hit, we will sit tight, and wait for the action to come to us.
We have had an incredible year as far as our option recommendations so the last thing we need to do is push things. As we close out 2011 and our 5th-straight winning year since inception, we also want to make sure we get off to a great start for 2012. The good news is that we are seeing some great setups and it won’t be too long before we are back in the saddle.
As we head to press, the Dow is down 46 points to 11,820 while the S&P is lower by 7 points to 1,212. The Nasdaq is off by 10 points to 2,545. Subscribers, check the Members Area for the trade updates.
