We knew we were going to need a move to the upside in order to get filled, but we would have thought this big of one would have done the trick. The problem is that today's rise caused the premium to dry up rather fast. It kind of felt like someone popped the balloon, causing the values of the options to dissipate extremely fast. We still feel like this is a very good move because we're not convinced that the rally is going to last. For tomorrow, let's throw this spread out there again and see if we can get someone to bite.

 

NEW TRADE ALERT (1)

 

Please Note: These are Day Orders and Limit Orders. This alert applies to all members, regardless if they are not in original put spread or not.

 

RUSSELL 2000 INDEX (RUT)

OPENING 640-650 NOVEMBER BEAR CALL SPREAD (15 contracts)

Sell 15 November Calls at 640 strike price

Buy 15 November Calls at 650 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $635.00.

We knew we were going to need a move to the upside in order to get filled, but we would have thought that today's action would have done the trick. The problem is that today's rise caused the premiums to dry up rather fast. It kind of felt like someone popped the balloon, causing the values of the options to dissipate extremely fast. We still feel this is a very good move because we're not convinced that the rally is going to last. For tomorrow, let's throw this spread out there again and see if we can get someone to bite.

 

NEW TRADE ALERT (1)

 

Please Note: These are Day Orders and Limit Orders. This alert applies to all members, regardless if they are not in original put spread or not.

 

RUSSELL 2000 INDEX (RUT)

OPENING 640-650 NOVEMBER BEAR CALL SPREAD (15 contracts)

Sell 15 November Calls at 640 strike price

Buy 15 November Calls at 650 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $635.00.

We knew we were going to need a move to the upside in order to get filled, but we would have thought that today's action would have done the trick. The problem is that today's rise caused the premiums to dry up rather fast. It kind of felt like someone popped the balloon, causing the values of the options to dissipate extremely fast. We still feel this is a very good move because we're not convinced that the rally is going to last. For tomorrow, let's throw this spread out there again and see if we can get someone to bite.

 

NEW TRADE ALERT (1)

 

Please Note: These are Day Orders and Limit Orders. This alert applies to all members, regardless if they are not in original put spread or not.

 

RUSSELL 2000 INDEX (RUT)

OPENING 640-650 NOVEMBER BEAR CALL SPREAD (15 contracts)

Sell 15 November Calls at 640 strike price

Buy 15 November Calls at 650 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $635.00.

The Market skid continues as the economic conditions come back into focus. Stocks continued to slide in today's session despite the lack of any troubling reports. Although there were two pieces of data released today, nothing was very troubling compared to much worse reports that came out when the Market was charging higher. But the lack of reasoning does little to ease the pain on a day when stocks tumbled heading into the closing bell.

 

For us, the more troubling part of the day was that the selling didn't seem to need a big catalyst for traders to hit the sell button. That makes us wonder what might happen later in the week if we do get some ugly reports. But for now, let's recap the news that did take place.

 

This morning's durable goods report was actually not too bad, considering that the previous -recording showed a negative 2.6% in August; today's reading of 1% for September should have been very good news for the Street. According to the release, orders for big-ticket manufactured goods rose 0.9% excluding transportation. That certainly reversed the downward trend that we saw last month and should help Thursday's reading on Gross Domestic Product (GDP). Analysts are looking for a growth of an annual pace of 3.2% for the third quarter when the data is released on Thursday. Keep in mind that the second quarter was an actual contraction of 0.7%.

 

 

 

Let's buckle our seatbelts because it could be a bumpy ride tomorrow when this is released. After all, after today's durable goods report came out, Goldman Sachs lowered its GDP estimate to 2.7%. Remember, it's all about how the number comes in compared to expectations.

 

After getting better-than-expected housing data for the last few weeks, the numbers reversed in today's reports. The Commerce Department reported that the number of new home sales dropped last month by a seasonally adjusted rate of 3.6%. This puts the annual rate at 402,000 in September. This was much lower than the 440,000 that analysts had predicted ahead of time.

 

There was also disappointment over the numbers being revised downward in August to 417,000 from a previously reported 429,000. Today's data showed the first decline in sales since the spring and now puts the annual pace off nearly 8% from one year ago. At the same time, the median sales price is over 9% lower than one year ago at $204,800.

 

Today's weekly oil and gas inventory report from the U.S. Department of Energy was pretty uneventful. It showed a larger-than-expected spike in gasoline inventories while also showing a continued cut in consumer demand. According to the government, gas supplies rose by almost 2 million barrels last week even though the Street was looking for a decline for the third straight week.

 

With oil, we can almost disregard the inventory report because crude has been rising and falling on the dollar as of late. When the greenback falls, money moves into oil as a hedge against the currency and when the dollar rises, it has the reverse effect. Crude finished the session down $2.09 at $77.46 a barrel on the New York Mercantile Exchange.

Today's Economic Reports

Date	ET	Release	For	Actual	Consensus	Prior	Revised From
Oct 28	08:30	Durable Orders	Sep	1.0%	1.0%	-2.6%	-2.4%
Oct 28	08:30	Durable Orders ex Transportation	Sep	0.9%	0.7%	-0.4%	0.0%
Oct 28	10:00	New Home Sales	Sep	402K	440K	417K	429K
Oct 28	10:30	Crude Inventories	10/23	0.78M	NA	1.31M

 

It was quite an ugly day for the Dow Jones Industrial Average. Once the large-cap index broke below its 20-day moving average (light blue line) the selling picked up. By the time the closing bell rang, the Dow was down triple digits with a loss of 119 points on the day. It was also not a good sign that the volume picked up a bit as the index tumbled lower. However, the index remains above its 50-day moving average (red line) with its closing price of 9,762. Let's keep a very close eye on its 50-day moving average the rest of the week. We need the index to make a nice reversal if it hits this level.

 

 

 

The S&P 500 is giving us an even scarier daily chart after its 20 points today. Not only did this take the index down to 1,042 points, it also left it sitting below its 50-day moving average (red line) on the chart. Let's keep a very close eye on this moving average that's sitting around the 1,050 point level. If the S&P 500 can make it back above this line, we should be in good shape. If not, then all bets are off.

 

 

 

The Nasdaq Composite led the way on the move up the chart and now appears to be leading the way downward. In today's trading, the tech-laden index shed 56 points and broke below its 50-day moving average (red line) on the chart. It's really quite remarkable how fast things have turned in this index. Let's keep a close eye on the tech names over the next two sessions to see if they can help turn this big red tide.

   

 

 

 

After lulling us to sleep last week, the VIX (CBOE VOLATILITY INDEX) has taken a sharp U-turn over the past three trading days. We were just monitoring the 20 point level last week and now the index has broken above its 50-day moving average (red line) and is pushing towards the old resistance in the 30 point area. If it's able to break above this level, we could be in store for some crazy volatility once again. Let's keep two hands on the steering wheel at all times!

 

 

 

The good news is that the selling has helped everyone get filled in the new spreads this week. The bad news is that the selling has continued even after we were all filled in the new spreads. Doesn't the Market know that we only needed enough red to get filled? Well, we certainly can't say we have been surprised by the retracement; we've been looking for it several months in a row now. We're still not totally convinced that this will lead to more selling, but it's starting to feel that way.

 

As we've been saying over and over again, just because we've been looking for one doesn't mean this will turn out to be the 10-15% + pull-back. Remember, for the last several months in a row we encountered nearly the same exact thing at the beginning of the month only to watch the Market reverse and make new, higher highs. This is what has prevented us from turning to call spreads or making all of these positions into iron condors already.

 

Over the past year the risk truly has been on the upside and we need confirmation other than our gut to tell us otherwise. Traders that have been using iron condors have been beat up pretty badly during this run and we don't want to end up that way just because we get one or two sessions of pain.

 

But even with that said, we have seen a ton of deterioration in our small-cap index (RUT) and need to ease the pain in this spread. With the RUT now breaking below its 50-day moving average (red line) on the chart and continuing to falter, we're going to add a call spread to this position, making it into an iron condor. If you have the right broker, this shouldn't require any addition funds for maintenance. The key is to make sure that we trade another 10 point spread on the call side and use the same number of contracts (the number of contracts might vary slightly if you're using a percentage allocation).

 

NEW TRADE ALERT (1)

 

Please Note: These are Day Orders and Limit Orders. This alert applies to all members, regardless if they are not in original put spread or not.

 

RUSSELL 2000 INDEX (RUT)

OPENING 640-650 NOVEMBER BEAR CALL SPREAD (15 contracts)

Sell 15 November Calls at 640 strike price

Buy 15 November Calls at 650 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $635.00.

 

 

For our current spreads, make sure your stops are set at the levels we set out when we entered the trades. This way, you shouldn't have to be glued to your monitors and give yourself any heartburn over the uptick in volatility. We set out our trading plan when we entered the spreads and we're going to stick to it. For now, let's take a look at each of our spreads in some detail to see how we're positioned heading into the final two trading days of the week.

 

CURRENT NOVEMBER SPREADS

STOCK	TYPE		STRIKES	CONTRACTS	CREDIT	CLOSE/DEBIT
RUT	Bull Put	530-520		15	0.50
OEX	Bull Put	455-445		15	0.55
GOOG	Bull Put	500-490		15	0.55
AAPL	Bull Put	185-180		15	0.40
MNX	Bull Put	155-145		15	0.40

OCTOBER PROFIT

$3,600.00

 

RUT 530-520 BULL PUT SPREAD (15 Contracts entered on 10/21/09)

Profit potential of $50.00 per contract

Contingent Stop Order set at $535.00

After a volatile session on Thursday that gave us a nice intraday reversal, the RUT gave it all back on Friday. The small-cap index tumbled 12.52 points on the day and finished the week at $600.86. The heavy selling also took the RUT back below its 20-day moving average (light blue line) on the chart and appears to be headed back to test its 50-day moving average (red line). While we certainly don't like to see the selling, let's not get too concerned until we see more of it. For now, we're sitting with a decent cushion of 70 points in this spread.

 

 

 

OEX 455-445 BULL PUT SPREAD (15 Contracts entered on 10/22/09)

Profit potential of $55.00 per contract

Contingent Stop Order set at $457.50

The OEX is actually looking a little better than the S&P 500 on its daily chart. The OEX is still holding at its 50-day moving average (red line) despite today's bloodletting. The index gave back 7.66 points in today's session and closed at $486.50. This cuts our cushion down to 30 points, but we could be sitting much worse.

 

MNX 155-145 BULL PUT SPREAD (15 Contracts entered on 10/28/09)

Profit potential of $40.00 per contract

Contingent Stop Order set at $157.50

It took us forever to get filled in this spread, but now we're glad we used our patience and didn't move up a strike or two. The rough session did take the MNX below its 50-day moving average (red line) on the chart thanks to its loss of $4.04. With the index closing at $168.21, we currently have a cushion of a little over 13 points in this spread. Let's see how it holds up over the next two sessions.

AAPL 185-180 BULL PUT SPREAD (15 Contracts entered on 10/26/09)

Profit potential of $40.00 per contract

Contingent Stop Order set at $187.50

After holding up so well on Monday, Apple wasn't able to avoid the selling during the last two days. In today's trading, it tumbled $4.97 and finished the session at $192.40. The bright spot is that it seems to be holding at its 20-day moving average (light blue line) on the chart. This moving average has provided decent support for the stock over the past several months. Let's see if it can continue doing this.

GOOG 500-490 BULL PUT SPREAD (15 Contracts entered on 10/27/09)

Profit potential of $55.00 per contract

Contingent Stop Order set at $505.00

For anyone having trouble getting filled in this spread yesterday, today should have taken care of that issue. Of course, the problem with that is Google lost 7.99 points in today's session and finished at $540.30. While this was not a good thing, we're still sitting in relatively good shape in this spread with 40 points separating the stock from our "short" strike price.

 

 

As always, Trade Happy and Trade Smart

 

 

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Current members can get paid to pass our name along! Refer our service to a new subscriber and if they stay a member for one month you'll get a free month's membership. Simply have them list your name in the "Discount Code" box when signing up. They will still get a free two week trial and if they stay one month, you'll get your Free month! There's no limit on the number of referrals that you can pass along. As a matter of fact, for every four referrals that you send our way you'll get a free six month subscription! With rewards like these, why not spread the word today?

 

We keep chipping away at the new spreads this month. Today we were able to get everyone filled in the Apple spread and half of the auto traders filled in the Google spread. With the weakness in the Market, we want to keep the orders the same for tomorrow and see if we can get everyone else into GOOG and the MNX spreads.

 

NEW TRADE ALERT (2)

 

Please Note: These are Day Orders and Limit Orders. These alerts only apply to those members that have not already been filled in the spreads.

 

MINI-NASDAQ 100 INDEX (MNX)

OPENING 155-145 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 155 strike price

Buy 15 November Puts at 145 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $157.50.

Google Inc. (GOOG)

OPENING 500-490 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 500 strike price

Buy 15 November Puts at 490 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $505.00.

We got the downdraft that we were looking for today, but it just wasn't enough to get our fills. But if we get another session like today, we should be in good shape. Let's leave our orders the same for tomorrow and see if we get that repeat.

 

NEW TRADE ALERT (3)

 

Please Note: These are Day Orders and Limit Orders. These alerts only apply to those members that have not already been filled in the spreads.

 

MINI-NASDAQ 100 INDEX (MNX)

OPENING 155-145 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 155 strike price

Buy 15 November Puts at 145 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $157.50.

 

Apple Inc. (AAPL)

OPENING 185-180 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 185 strike price

Buy 15 November Puts at 180 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $187.50.

 

Google Inc. (GOOG)

OPENING 500-490 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 500 strike price

Buy 15 November Puts at 490 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $505.00.

The Market continued sliding off the slippery slope of 10,000. Despite some encouraging housing news and a couple of solid earnings reports in the tech sector, stocks continued to slide on Friday. With the dollar gaining and commodities falling, large-cap industrials and energy names dragged the Market lower on the final trading day of the week. The Street looked right past some upbeat earnings announcements from both Microsoft and Amazon on Friday. Microsoft easily topped analysts’ expectations on Friday morning due to its massive cost cutting and solid sales from Windows. Of course, it also helped that the company just unveiled its new Windows 7 last night, which increases earnings expectations for the upcoming quarters. At the same time, Amazon released its quarterly results on Thursday night and posted a big surprise to the upside. The company’s Kindle sales have been huge, helping the stock to touch a 10 year high in today’s session. The lone economic report today came from the existing home sales numbers, which was surprisingly good. According to the National Association of Realtors, sales spiked to a 5.57 million unit annual average thanks to the strong September sales. This was much better than the 5.35 million that analysts were expecting. Keep in mind that the average was only 5.1 million one month earlier in August. Of course, today’s pessimism centered around the thought that this number was artificial due to the government’s incentives to first time home buyers. Many analysts were talking about the fear of what might happen when these incentives are removed from the housing market in upcoming months. The other pessimism on Friday was from some of the railroad CEOs who were dampening expectations. The pessimism from the transportation companies really deflated any near-term recovery talk and caused traders to dump these stocks on Friday. Keep in mind that transportation stocks usually are some of the early indicators of an economic recovery; and with these stocks getting hit, it was very hard to expect any other stocks to fight the negative trend on Friday. With the dollar bouncing off its low for the year, this meant trouble for commodities. The price of oil fell with the rest of the materials on Friday when it shed 0.9% to finish the week just above $80 a barrel. It settled at $80.50 a barrel on the New York Mercantile Exchange. Gold followed suit when it gave up 0.2% on the day to close at Friday’s Economic Reports

Date	ET	Release	For	Actual	Consensus	Prior	Revised From
Oct 23	10:00	Existing Home Sales	Sep	5.57M	5.35M	5.09M	5.09M

The two-week winning streak for the Dow Jones Industrial Average was broken last week with the large-cap index tumbling 23 point over the five day stretch. On Friday, it shed 109 points to finish the week back under the 10,000 point mark at 9,972. On the chart, last week’s high has proven to be strong resistance for the index. If the Dow remains weak in upcoming sessions, let’s see if it manages to hold above its 20-day moving average (light blue line) on the chart. A break above the nearest resistance line or a fall below the support could signal a much bigger move in either direction.    
The S&P 500 continued to struggle with the 1,100 resistance level last week. After taking a beating on Friday, the index finished the week down 8 points at 1,079. Just like the Dow, we’ll be watching the S&P 500 to see how it handles its rising 20-day moving average (light blue line) this week. A break below it could lead to more selling while a bounce off it could give the bulls more confidence and help it blow right past the resistance from last week. It should make for a very interesting week.
The Nasdaq Composite gave us a very interesting candle on Friday. After gapping higher at the open, the tech-laden index finished the day significantly lower when it gave up 10 points on the session. This put the Nasdaq down .11% for the week and leaves us wondering about the upcoming week. Unlike the other two indices, the Nasdaq actually reached its 20-day moving average (light blue line) last week and then reversed off that level. Let’s keep a very close eye on the Nasdaq this week because it has a much tighter trading range. A break in either direction could lead the rest of the Market in that direction.       The VIX (CBOE VOLATILITY INDEX) looked like it was going to break below 20 point barrier last week before the sell-off took place on Friday. This caused the fear index to spike 1.58 points and finish the week at 22.27 points. If the selling persists, we’ll see this index climb even farther. Let’s watch it for any indication of the Market sentiment on Monday.  

  The volatility last week helped us get into most of our new spreads. The only one playing hard-to-get was the MNX put spread. Although the selling has us concerned about a more broad-based pull-back, it’s hard to say that there’s evidence of this just yet. Remember, we’ve been saying the same thing for the past several option cycles only to see any pull-back met with more intense buying. As a matter of fact, it has been the first week or two of the cycles that has played out exactly the same. As soon as we get into our put spreads, the Market sells off for a few sessions then reverses and heads higher with conviction. While we still think that the Market is way ahead of the fundamentals and even technicals, we’d rather be rich than right. With this in mind, let’s keep playing from the put side until the Market comes back to reality. In the mean time, let’s keep very conservative in case things fall apart this cycle. This should help us ride out any selling bouts and still come away with a profit. With that in mind, let’s stay with our MNX spread for Monday and let the index come to us. At the same time, we’re going back to a couple of our favorites, AAPL and GOOG. Both stocks are coming off excellent earnings reports and some strong buying that followed. Let’s take advantage of this relative strength by coming in with some put spreads at very safe levels. As we said with our new spreads last week, if things change we can always make these spreads into iron condors to help ease any pain that a Market turn might cause. But first things first, let’s get into the put side and see if we can add to our current profit potential that we have already working this month. NEW TRADE ALERT (3) Please Note: These are Day Orders and Limit Orders. These alerts only apply to those members that have not already been filled in the spreads. MINI-NASDAQ 100 INDEX (MNX) OPENING 155-145 NOVEMBER BULL PUT SPREAD (15 contracts) Sell 15 November Puts at 155 strike price Buy 15 November Puts at 145 strike price Total Credit 0.40 per contract Potential Profit $600.00 Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $157.50. Apple Inc. (AAPL) OPENING 185-180 NOVEMBER BULL PUT SPREAD (15 contracts) Sell 15 November Puts at 185 strike price Buy 15 November Puts at 180 strike price Total Credit 0.40 per contract Potential Profit $600.00 Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $187.50. Google Inc. (GOOG) OPENING 500-490 NOVEMBER BULL PUT SPREAD (15 contracts) Sell 15 November Puts at 500 strike price Buy 15 November Puts at 490 strike price Total Credit 0.55 per contract Potential Profit $825.00 Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $505.00.
MNX DAILY CHART

AAPL DAILY CHART



GOOG DAILY CHART


  CURRENT NOVEMBER SPREADS

STOCK	TYPE		STRIKES	CONTRACTS	CREDIT	CLOSE/DEBIT
RUT	Bull Put	530-520		15	0.50
OEX	Bull Put	455-445		15	0.55

OCTOBER PROFIT

$1575.00

RUT 530-520 BULL PUT SPREAD (15 Contracts entered on 10/21/09) Profit potential of $50.00 per contract Contingent Stop Order set at $535.00 After a volatile session on Thursday that gave us a nice intraday reversal, the RUT gave it all back on Friday. The small-cap index tumbled 12.52 points on the day and finished the week $600.86. The heavy selling also took the RUT back below its 20-day moving average (light blue line) on the chart and appears to be headed back to test its 50-day moving average (red line). While we certainly don’t like to see the selling, let’s not get too concerned until we see more of it. For now, we’re sitting with a decent cushion of 70 points in this spread.
OEX 455-445 BULL PUT SPREAD (15 Contracts entered on 10/22/09) Profit potential of $55.00 per contract Contingent Stop Order set at $457.50 The OEX looked like it was headed higher on Friday’s open when it gapped to the upside at the opening bell. However, that was its high for the session as the index gave it all back and then some. It finished the day down 4.84 points at the nice round number of 500.00. But unlike the RUT, the OEX is still sitting above its 20-day moving average (light blue line) and 45 points above our “short” strike price. Just like our other spread, let’s not get too worried until the index gives us a reason to be concerned.

As always, Trade Happy and Trade Smart NEW REFERRAL PROGRAM Current members can get paid to pass our name along! Refer our service to a new subscriber and if they stay a member for one month you’ll get a free month’s membership. Simply have them list your name in the “Discount Code” box when signing up. They will still get a free two week trial and if they stay one month, you’ll get your Free month! There’s no limit on the number of referrals that you can pass along. As a matter of fact, for every four referrals that you send our way you’ll get a free six month subscription! With rewards like these, why not spread the word today?

Slowly but surely we're getting our fills this cycle. While everyone has gotten into our RUT and OEX spreads, the Nasdaq hasn't been fully cooperating for all of our traders. Due to this, we're going to make another attempt tomorrow. For now, let's keep our trade alert the same and see if we get another round of intraday selling that helps us get filled. Remember, we always want to be patient on the way into spreads.

 

NEW TRADE ALERT (1)

 

Please Note: These are Day Orders and Limit Orders. These alerts only apply to those members that have not already been filled in the spreads.

MINI-NASDAQ 100 INDEX (MNX)

OPENING 155-145 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 155 strike price

Buy 15 November Puts at 145 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $157.50.

Easy come easy go. After finally holding above the 10,000 point barrier last week, the Dow Jones Industrial Average now finds itself sliding fast. While stocks were climbing once again this morning, the green session faded fast late in the day. Although the index was hovering around the 10,000 point mark heading into the final hour of the session, the fast and furious selling came rushing in and stocks fell hard heading into the closing bell.

 

The blame for this afternoon's late selling is being placed at the foot of a banking analyst who cut his rating on Wells Fargo. Not only did he cause the stock to drop 5.1%, but the whole Market headed south. We're not all that certain that one analyst took the whole thing down today, but that's what's being reported elsewhere.

 

We tend to believe that the Street has been looking for any signs of uneasiness and decided that today was a good time to take some profits off the table. The only question we have now is whether this is a small pullback or the start of a bigger move. Let's take a look at the Dow's intraday chart to see just how powerful that late-day move was.

 

 

Of course, it didn't help matters that word also leaked out today that the Administration is going to require Wall Street firms to make drastic pay cuts. The fear is that there will be a mass exodus of talent leaving the major firms. This just helped add to the anxiety around the financial stocks today, causing the sector to lead the Market lower into the close.

 

Oil settled just before the selling started in the Stock Market. This is probably why crude was able to hold above $81 a barrel on Wednesday. With the dollar continuing to falter, investors have pushed funds into oil with crude jumping $2.25 in today's session to close at $81.37 a barrel on the New York Mercantile Exchange. The interesting thing about the rise in crude was that this was despite the weekly EIA data coming out today that showed a rise in oil inventories. Of course, the government report also showed a drawdown in gasoline levels during the same time frame. Gold was also moving higher on the day. It gained $5.90 an ounce to settle at $1,064.50.

 

Besides the oil inventory report, the only other piece of news today came from the release of the Fed's Beige Book. As expected, the release showed signs of stabilization and improving conditions. It was nothing new and certainly not an unbiased piece of economic data.

Today's Economic Reports

Date	ET	Release	For	Actual	Consensus	Prior	Revised From
Oct 21	10:30	Crude Inventories	10/16	1.31M	NA	0.33M
Oct 21	14:00	Fed's Beige Book

 

After a solid start to the day, the Dow Jones Industrial Average gave everything back and then some at the close. The large-cap index dropped 92 points by the time the closing bell finally rang, settling back below 10,000 at 9,949 points. Let's keep a close eye on the internals tomorrow to see if this ugly sentiment persists into tomorrow's session.   

 

 

The S&P 500 also had a nice gain going this morning before the avalanche occurred. By the time the trading was over, the index was down 9 points at 1,081. The index gave us a very ugly candle on the chart, which isn't a very good thing to see heading into tomorrow's session.  

 

 

After jumping to a new high for the year this morning, the Nasdaq Composite also faded fast during the final hour of trading today. The tech-laden index finished the session down 12 points at 2,150 and has a decent loss now on the week. Let's see if it's able to reverse things over the next two trading days.

  

 

After dropping to a new yearly low on Wednesday, the VIX (CBOE VOLATILITY INDEX) took off like a rocket when the Market tumbled. It finished the trading day up 1.32 points at 22.22. Let's keep a close eye on this index for any additional fear or anxiety that seemed to appear late this afternoon.

 

 

Although the selling isn't always a good thing, it did help us get filled in one of our spreads late today. We were able to get a lot of members filled in our RUT spread. However, the rest of the new positions didn't pull back enough for our entries. Although we have been talking about an expected pull-back for quite a while now, keep in mind that every one we encountered over the past several months has been short-lived. Due to this, we want to stay on the put side because during this recent stretch, the risk has been on the call side. Until we see much more selling, we just can't take the risk with call spreads right now.

 

With this in mind, let's keep our other trade alerts the same and see if we get some more selling tomorrow. This should let the Market come to us for the fills. Now, if the selling does turn out to be significant, we can always come back and make these spreads into iron condors. We also might add some layers to them just like we've done numerous times with the RUT over the past six months. But first things first! Let's leave our trade alerts the same for tomorrow and see if we can let the new-found volatility work in our favor.

NEW TRADE ALERT (3)

 

Please Note: These are Day Orders and Limit Orders. These alerts only apply to those members that have not already been filled in the spreads.

 

RUSSELL 2000 INDEX (RUT)

OPENING 530-520 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 530 strike price

Buy 15 November Puts at 520 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $535.00.

S&P 100 INDEX (OEX)

OPENING 455-445 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 455 strike price

Buy 15 November Puts at 445 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $457.50.

 

MINI-NASDAQ 100 INDEX (MNX)

OPENING 155-145 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 155 strike price

Buy 15 November Puts at 145 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $157.50.

 

OEX DAILY CHART

 

 

MNX DAILY CHART

 

CURRENT NOVEMBER SPREADS

STOCK	TYPE		STRIKES	CONTRACTS	CREDIT	CLOSE/DEBIT
RUT	Bull Put	530-520		15	0.50

OCTOBER PROFIT

$750.00

 

RUT 530-520 BULL PUT SPREAD (15 Contracts entered on 10/21/09)

Profit potential of $50.00 per contract

Contingent Stop Order set at $535.00

For those of us that did get filled in the RUT spread today, we like where we're sitting in this one. Although the index declined $8.30 and settled at $605.11, it's still sitting 75 points above our put spread. On the chart, we have numerous support levels that should slow down any selling that we might see during this cycle. After all, the RUT would have to drop to a level that it hasn't been to since July in order to give us any pressure in our put spread.

 

 

As always, Trade Happy and Trade Smart

 

 

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Perhaps the third is the charm? We got a little closer to getting filled in today's action, but couldn't quite get into the new positions. With the futures pointing lower this evening, let's keep our strike prices and credits the same for tomorrow and see if we can get a little more volatility to help us out. Remember, we have plenty of time this cycle so let's not get too excited about making adjustments to these entries just yet.

NEW TRADE ALERT (3)

 

Please Note: These are Day Orders and Limit Orders and do not apply to any members that were filled already.

 

RUSSELL 2000 INDEX (RUT)

OPENING 530-520 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 530 strike price

Buy 15 November Puts at 520 strike price

Total Credit 0.50 per contract

Potential Profit $750.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $535.00.

 

S&P 100 INDEX (OEX)

OPENING 455-445 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 455 strike price

Buy 15 November Puts at 445 strike price

Total Credit 0.55 per contract

Potential Profit $825.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $457.50.

 

MINI-NASDAQ 100 INDEX (MNX)

OPENING 155-145 NOVEMBER BULL PUT SPREAD (15 contracts)

Sell 15 November Puts at 155 strike price

Buy 15 November Puts at 145 strike price

Total Credit 0.40 per contract

Potential Profit $600.00

 

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $157.50.

 

As always, Trade Happy and Trade Smart