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The bulls tried to rally at the open but after an initial pop the bears have taken control and are heading into the weekend with a huge physiological edge.
The recent trading range gave all the signals that the market was going to make an explosive move and once it broke support or resistance we told you the momentum was going to produce huge price swings.
The Dow has traded in a range of 300 points in just three hours today as it has been down as much as 279 points and up 58.
Currently, the Dow is off by 101 points to 10,418 but 5 minutes ago it was down 10 points. So it doesn’t matter what we type right now except that the trend is down. The S&P is lower by 11 to 1,117 while the Nasdaq is showing a decline of 32 points to 2,286.
There are plenty of reasons behind the massive sell-off and we expected some sort of a bounce after the good jobs number this morning but the geopolitical events are just too great to ignore.
The market is now looking for a crystal clear sign that there will be a rescue plan for Greece and that they will not default. Quite frankly, the banks in Europe don’t trust each but they need to do the bailout package.
The vote from European nations to ratify the bailout bill into existence will be a key event and it will need to be approved before May 19th. This is when Greece is due to fork out 9 billion euro.
There is not much else we can say except that trading will be choppy and the trend is now to the downside. The market changed on a dime this week and we loaded up on three put option trades that have done really well. We also had some call options that got battered and bruised but that should be expected when the market makes a sudden reversal.
The good news is that we are finally getting to a market that WE are comfortable with which may sound crazy. These price moves are producing opportunities that easily offset some of the decay of a flat or range bound market.
We will be updating our 2010 portfolio after the market’s close and you will see we are picking up momentum as well. We are starting to see trades that can hit 200%-300% returns but we think there will be opportunities to make up to 400%-500% in the weeks ahead if the volatility continues.
The sell-off has hammered quite a few quality stocks and there will be a time to play Corning (GLW, $17.57, up $0.07) or Akamai Technologies (AKAM, $35.82, down $1.57) again. However, that may not be until July or August as we expect the current trend could last for a few weeks, if not months.
We will also be busy this weekend with the Weekly Wrap which will come out Sunday night. Again, if the market heads lower or the trend stays intact, don’t be nervous about trying to make money in a down market. We said most people don’t like to do it but when you can make 220% on a put option in two days it proves that you can make money when everyone else is in panic mode.
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