1:00pm (EST)
The bulls are having a field day as the market has once again pushed up to the top of its current trading range. This time may be different as the major averages have actually broken through our key resistance levels, except for one. The economic news hasn’t been all that great but the bulls continue to climb a wall of worry as we push towards a double top.
Sales of new homes had their second-worst month on record in August, signaling that the housing market is still a headwind for the economy. The Commerce Department said new home sales were unchanged at a seasonally adjusted annual sales pace of 288,000 as sales were down nearly 30% from the same month a year earlier. The experts were looking for a number of 291,000 new units.
August durable goods fell 1.3% but were better than the 1.4% decrease that Wall Street had been expecting. Excluding transportation, orders actually increased 2%, which is much stronger than the expected increase of 0.6%.
Despite the mixed results, the Dow is surging 178 points, or 1.7%, and is at 10,840 while the Nasdaq is up 42 points to 2,369. The S&P 500 is showing a 20 point pop and is at 1,145. Our breakout levels for the Dow have been 10,800 and for the Nasdaq 2,350. They have been stretched. The S&P is still below our 1,150 top so we are still unsure if this is a viable breakout or not.
Predicting a market breakout or market correction is never an easy job and these are the times where you either look like a genius or you just give in and join the party. That is our feeling because we remain extremely cautious on the current rally because something just doesn’t feel right. We are neither bearish, nor bullish, we just play the trend and after four months of a trading range either – we stay in the range and head lower or the market sets new highs. Pretty simple.
We do have some current call options and if we are on the verge of a breakout then there will be plenty of opportunities to make some more cash but we are also using this opportunity to buy some really CHEAP out of the money puts.
These are the reasons we have been buying a few call options, playing straddles and strangle option trades, AND buying cheap put options. Our goal is to keep our account at even (which is where we currently are if you look at our updated track record over the weekend) while waiting for a clear, definitive trend.
Gold continues to be a safe haven as investors seek protection of a weakening dollar. Silver has also been on fire and is at 30-year highs. Gold is at $1,296 an ounce while silver has climbed 1% to $21.38 an ounce today. Gold is up nearly 20% this year and is heading for its 10th consecutive annual gain.
As we head into the weekend, we will be breaking down the charts to get a feel on next week’s action. We are also working with some new features that we plan on rolling out, including video updates, so we may or may not do the Weekly Wrap this weekend. We rarely miss an issue but we are also preparing for the launch of our new Trading Manuals that should be ready for purchase by the end of next week.
In the two trading manuals, “How to Trade Options on Momentum Stocks” and “Momentum Stocks Watch List”, we cover everything you need to know to start finding successful, triple-digit options returns. Check out our track records for the past 3 years, and you will see what kind of results you can get with trading options, especially with trending and volatile markets.
September is also our anniversary month, so many thanks to all of you who have been with us through the years, and many thanks to those of you just joining us.
Given today’s big pop, we thought it would be appropriate we leave you with a video preview. Wall Street 2: Money Never Sleeps opens up today in theaters and you can bet we will be checking it out. Again, we may be back Sunday night with a quick Weekly Wrap but if not, we will be back Monday morning with a recap of this week and what to look out for next week.
Have a good weekend everyone and watch S&P 1,150 going into the close…
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