12:30pm (EST)
The bulls faced trouble at the open and the talking heads have been all jacked up on a pending correction following yesterday’s pullback and today’s test to the second wave of support levels.
The Dow is on track for its worst week since June of 2012 despite the Dow Transports breaking out to new highs. We talked about the relationship between the two in our Dow Theory series in November and the blue-chips will either follow the Transports or continue their breakdown.
The Dow will need to rebound into today’s close and into next week or there could be some real trouble coming. The indexes are still hovering in the bottom of their trading ranges but the volatility this week could also be a prelude to what’s coming.
While we do have a few trades that could be affected by a pullback, other trades are doing well as we have got off to a fast start for 2014. The Daily newsletter is 7-0 and the Weekly Wrap is 5-1.
We have remained patient during the recent 5-week trading range and we mentioned last week we could see a 3,000 point swing in the Dow this year. This should not worry you as this type of action will make us an incredible amount of money if we get the moves right.
It is too early to say if the move comes to the downside or upside but remember it is just as easy to make money when there is a market selloff by using put options.
The chances the indexes remain in a trading range are good but like we have said, we will be well prepared if there is a continued selloff.
The Dow is down 175 points to 16,022 while the S&P 500 is lower by 24 points to 1,804. The Nasdaq is declining 65 points to 4,153 and the Russell 2000 is off 21 points to 1,151. The S&P 500 Volatility Index ($VIX, 16.06, up 2.02) is surging nearly 17% and has cleared 15. If this level holds into the close, start flinching as we could have itchy trigger fingers next week.
We have a lot to cover today with our current trades, including a Profit Alert on a trade that is up 233%! We will be back Sunday night with the Weekly Wrap and Monday morning with the Daily. Until then, have a great weekend everyone!
Special Notice: Our 2014 option trading manual, How to Trade Options on Momentum Stocks, is in production phase and will start to ship next week! For everyone that upgraded to a 1-year deal through our special offer, you will be getting tracking numbers to let you know when the course will arrive. Thank you for your patience and we really feel you will enjoy the tips the course has to offer to make you a better trader.