RUT TRADE ALERT for Income Spread Trader -

Regular Members & Pro Trader

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 540-530 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 540 strike price

Buy 15 January Puts at 530 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 $545.00.

Stocks rally on the final trading day of the December options cycle, capping off another profitable month for our spreads. It was tech stocks that helped push the Market into positive territory on Friday, but it wasn't enough to move all of the indices into positive territory on the week. However, the uneventful week allowed us to coast to another profitable month with all of our spreads expiring worthless.

Before we take a look at our spreads, let's recap the trading on Friday. Although there was no economic data released on the day, there was plenty of corporate news that helped shape the trading session.

It was the positive earnings in the tech sector that lit a fire under the bulls on Friday. Both Research In Motion and Oracle had upside surprises with their better-than-expected earnings results. This caused the Nasdaq to spike and the other indices to follow suit.

The bounce-back on Friday followed two sessions of selling, ignited from the release of the FOMC policy statement on Wednesday afternoon. Then on Thursday, the Market continued falling after the country of Greece had its debt rating downgraded by Standard & Poor.

The trading volume on Friday did pick up, but that was more to do with the session being a quadruple witching than anything else. Volume rose to 7.2 billion shares, which is significantly higher than the average of 5.7 billion that has been turning over each session so far in 2009.

Crude climbed again on Friday with a $0.71 gain per barrel. This helped oil finish the week up 5% over the past five trading days with its closing price of $73.56 a barrel on the New York Mercantile Exchange. Gold also was up on Friday, but finished the week lower when it settled at $1,110.80 an ounce. Meanwhile, the dollar picked up steam on Friday when it rose against other major currencies.

The activity this week should really slow down due to the shortened Christmas trading week. The Market is set to close early on Thursday. There are no corporate earnings on the calendar, but there will be plenty of economic data coming out. This includes the third quarter GDP (final revision) and housing data set to be released on Tuesday. On Wednesday, we'll get an update on personal income and spending and then will finish up with durable goods orders on Thursday's short session.

Friday's Economic Reports

The Dow Jones Industrial Average was able to climb 20 points on Friday, halting its downward skid. The large-cap index reversed at a nice support level on the chart, but still slipped 142 points on the week. Its closing price of 10,328 points leaves the index back below its 20-day moving average (light blue line) on the chart, but above its 50-day moving average (red line). Let's keep a close eye on both of these averages this week to see if it breaks above or below either of them.   

The S&P 500 also reversed its downward trend on Friday when it moved up 6.39 points on the day. However, it also fell on the week with a 0.36% loss over the last five trading days. It closed at 1,102 points on Friday, which left the index just below its 20-day moving average (light blue line) on the chart. However, just like the Dow, the S&P 500 remains above its 50-day moving average (red line) on the chart. Although it did fall last week, it really isn't sitting too far off its high for the year. One good week could push this index back to that level quite easily.     

The Nasdaq Composite was the bright spot on Friday's session. The tech-laden index gapped higher on the open and then continued rising throughout the day. The index finished the session up 31 points, which pushed the Nasdaq into positive territory for the week. Its closing price of 2,211 points also puts the index near its high for the year. Let's see if it can break out to a new high on this holiday-shortened week.   

Once again, the VIX bumped up against its 50-day moving average (red line) on Friday and then fell from that level. It finished the session 0.83 of a point lower, but did climb on the week with its closing price of 21.68 points on Friday. This week, let's watch to see if it once again presses higher or falls like it did on Friday's session.

Well......it wasn't the perfect option cycle for us, but it got the job done. We had plenty of struggles this month getting everyone filled in the spreads early on in the cycle. But once we got the fills, it was a pretty laid back month. Of course, that's exactly the way we like them!

After really suffering through an option cycle during the prior month, we wanted to slowly dip our toes back in the water and make sure that we used plenty of safety this month. While the profit ended up being smaller than we usually like to see, we can't get too upset about such an easy cycle. All of our spreads finished way out of the money and we coasted to a 100% profitable cycle. Let's go ahead and add up the profits for December.

EXPIRED DECEMBER SPREADS

RUT 500-490 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit of $40.00 per contract

RUT 540-530 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

Profit of $35.00 per contract

OEX 465-455 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit of $49.00 per contract

OEX 485-475 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

Profit of $35.00 per contract

GOOG 550-540 BULL PUT SPREAD (15 Contracts entered on 12/07/09)

Profit of $40.00 per contract

While we would have loved to have 12 profitable months for 2009, it looks like we fell one short. We ended the year going 11 for 12 and a nice profit for the year, but we'll have plenty time to recap that later. When we consider some of the volatility we witnessed this year, we really didn't do too badly. Our only bumpy cycle turned out to be the November cycle, which certainly gave us a beating. Of course, the tough part about that one was that all of our spreads would have finished the month with a profit (as we figured). But that's the way trading goes. We're going to get that kind of hair-raising volatility at times, we just want to be able to control the risk as best possible. This way, we finish the year with a healthy profit the way we did in 2009.

We'll have plenty of time to spend recapping the year that was. For now, let's start getting things started with a nice profit for January of 2010. Let's start things off with our reliable index spreads for the New Year. We're going to try to keep things safe but let's try to inch that profit potential a little higher this month.

We know that we'll see some selling during the end of this year for tax reasons. However, we'll also probably get a lift at the beginning of 2010 with investors putting the money back to work. Let's attempt to take advantage of that increased volatility that this time of the year offers. We're going to start with our reliable spreads that have been like money in the bank.

Both of our indexes from last month and GOOG are offering some excellent opportunities after last week's move. For the RUT, we're going to come back with the same exact strike prices as our second put spread last month. There's nothing we love more than coming in at the same exact levels and picking up an even better credit. Let's take advantage of all the time premium that's out there for January.

At the same time, we're going to come back with an OEX put spread at the same strikes as our first put spread last month. This index hasn't been as strong as the RUT, which is why we're able to come in with lower strikes for Monday. However, we're still able to pick up a very nice credit at these levels. We also like the fact that we're placing our strikes below several very strong support levels, which should help us out if there's any significant amount of selling around the end of the year.

Let's cap off the new trades for tomorrow by coming back with a put spread on Google at the strike prices we originally tried to get last month. This will be down a level from the put spread we actually got filled in and at a credit that also appears to be better. With the stock continuing to hold its bullish momentum, we feel that it should remain strong heading into its earnings release in January. This should help keep the stock price propped up and help us pull in a nice credit along the way. Let's start with these three spreads for Monday and see if we can get the New Year started right.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders.

RUSSELL 2000 INDEX (RUT)

OPENING 540-530 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 540 strike price

Buy 15 January Puts at 430 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 $545.00.

S&P 100 INDEX (OEX)

OPENING 465-455 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 465 strike price

Buy 15 January Puts at 455 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 $467.50.

Google Inc. (GOOG)

OPENING 540-530 JANUARY BULL PUT SPREAD (15 contracts)

Sell 15 January Puts at 540 strike price

Buy 15 January Puts at 530 strike price

Total Credit 0.45 per contract

Potential Profit $675.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $542.50.

RUT DAILY CHART

OEX DAILY CHART

GOOG DAILY CHART

As always, Trade Happy and Trade Smart

Stocks finish mixed after the Fed vows to keep interest rates low. The Market was holding in green territory until the release of the FOMC policy statement Wednesday afternoon. While the committee did state that the economy appears to be picking up, it also decided to keep the key interest rate between 0% and 0.25% for the time being.

Traders have been bracing for some stronger language from the Fed regarding the possibility of rates moving higher sometime in the future. However, that language did not come in today's policy statement. Instead, members noted that the consumer spending remains weak with credit remaining tight. This prompted the FOMC to keep the federal funds rate at the historically low rate through the end of the year, marking 12 straight months at the low rate. 

In other economic data on the day, the Consumer Price Index (CPI) increased 0.4% last month. This measure of consumer inflation is coming off a prior advance of 0.2% in October. This number was within the range that analysts had forecasted while Core CPI (excluding volatile food and energy) came in below expectations with its flat reading.

Also on the day, the Commerce Department reported that housing starts climbed to an annual rate of 574,000 in November. While this number was in line with expectations, building permits increased to an annual rate of 584,000 in November. This was ahead of expectations and shows an increase in builder confidence.

Crude climbed for the second straight session after the Energy Information Administration reported a surprising drop in supplies. After several weeks of rising supplies and falling demand, the pattern reversed in today's inventory report. The government data showing a 3.7 million barrel drop in supplies helped the price of oil rise $1.97 in today's session, taking the price of a barrel up to $72.66 on the New York Mercantile Exchange. This week's rally in crude helped snap its nine-session losing streak.

Today's Economic Reports

The Dow Jones Industrial Average fell for the second straight day despite being up for most of the session. It was the weakness after the FOMC statement that caused the large-cap index to finish the session in red territory. The Dow gave up 10.88 points in today's session when it closed at 10,441. While it finished the day in negative territory, it did once again test resistance near the 10,500 point area during today's trading. However, for the third day in a row, this barrier proved to be too tough for the large-cap index. Let's see if this resistance continues to hold up the rest of the week.

The S&P 500 also ran into trouble this afternoon, but was still able to post a 1.25 point gain at the close. This fractional gain helped the index finish the session at 1,109 points with its fifth winning session in the last six trading days. On the chart, the S&P 500 seems to be stuck between its high for the year around the 1,120 point area and its 20-day moving average. Let's see if it's able to break out of this range during the final two trading days of the week.

The Nasdaq Composite was certainly the strongest of the three major indices. It managed to hold onto a 5 point gain at the closing bell. This 0.27% increase helped the tech-laden index finish the day positive for the second time this week with its closing price of 2,206. The Nasdaq was able to break out to a new high for the year intraday, but wasn't able to hold there at the close. Let's see if it's able to continue pushing up the chart the rest of the week.

The VIX (CBOE VOLATILITY INDEX) made a move higher this afternoon, but still finished the day down 0.95 points at 20.54. This keeps the "fear index" suppressed on the week, well below its 50-day moving average (red line). Unless it's able to make its way back to this line, we shouldn't have anything to worry about.    

So far things are going just as planned for expiration week. The moves have been small and insignificant as far as our spreads are concerned. This has helped take the stress out of expiration week and should help us get back into the profit column this month, capping off another solid year for spread trading. If it wasn't for last month, it would have been quite a remarkable year for our track record. But even so, it's hard to get too upset about the kind of year that we've had. We'll have plenty of time to dissect this in the weeks to come, but for now, let's take a look at how we're sitting heading into the final two trading days of the December option cycle.

RUT 500-490 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

RUT CLOSED AT $611.21 ON FRIDAY (111.21 points away from our put spread)

Profit potential of $40.00 per contract

Contingent Stop Order set at $505.00

RUT 540-530 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

RUT CLOSED AT $611.21 ON FRIDAY (71.21 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $545.00

With the RUT continuing to march higher this week, this has left both of our spreads in excellent shape. The small-cap index moved up another 4.90 points in today's trading, extending the cushions in both of our put spreads. It has now moved well off its 50-day moving average (red line) on the chart and appears poised to test its high for the year in the area of 625 points. Let's see if this continues to play out the rest of the week.

OEX 465-455 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

OEX CLOSED AT $511.97 ON FRIDAY (46.97 points away from our put spread)

Profit potential of $49.00 per contract

Contingent Stop Order set at $467.50

OEX 485-475 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

OEX CLOSED AT $511.97 ON FRIDAY (26.97 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $487.50

The OEX has not been as strong this week. After moving higher on Monday, the index has run out of steam. It fell hard yesterday and then gave back all of its early morning gains this afternoon when it tumbled 0.16 at the close to finish the day in red territory. This leaves the index back below its 20-day moving average (light blue line) on the chart. Despite this, we're still in great shape in both of our put spreads this month and should be able to double up on our profits in this index for the December options cycle.

GOOG 550-540 BULL PUT SPREAD (15 Contracts entered on 12/07/09)

GOOG CLOSED AT $597.76 ON FRIDAY (47.76 points away from our put spread)

Profit potential of $40.00 per contract

Contingent Stop Order set at $552.50

Google had another nice gap higher this morning on the open and then was able to hold in positive territory for the remainder of the session. It finished the day up $4.62, just below the $600 barrier. The stock has been helped this week by analyst upgrades and problems facing its rivals. The combination of these two has helped keep Google's bullish momentum alive. This should keep the stock moving north heading into its January earnings release.  

As always, Trade Happy and Trade Smart

Consumer spending and retail sales figures went hand in hand on Friday, helping to push the indices back to within striking distance of their highs for the year. With so much of the economy riding on the backs of consumers, the Street applauded Friday's economic data and pushed the Market higher on the day, lifting the major indices higher for the week.

While traders were looking for a nice jump in retail sales last month, Friday's update from the Commerce Department even surprised a lot of the bulls. The government data showed a spike of 1.3% in November as consumers flocked back to retailers. Ahead of the release, analysts were expecting a rise of 0.7% for the month of November. While we would expect to see a big jump in clothing stores heading into the Christmas season, that's not where the spike in sales happened. Instead, it was from building materials, car dealers, and gasoline stations. The building material sales can certainly be applauded because it might show some hints of a turnaround in the housing market. But the other two categories are often volatile and it's hard to pin our economic growth on either of these two sectors of the economy. Despite this, it was very nice to see the large U-turn that the data has given us on the chart below.

The retail sales numbers tied in nicely with the University of Michigan's consumer sentiment index that came out later in the morning on Friday. The uplifting mood of the consumer was evident with the index jumping six points from the previous reading of 68.8. On Friday, the preliminary reading for December rose to 73.4 and reflected an improving sentiment in the economy as a whole. However, keep in mind that this index is often volatile and can turn quickly with changes in energy prices or the unemployment rate. But with that said, it was very good to see the preliminary report come in so good for December. Let's just see if it stays this strong when the final report comes out two weeks from last Friday. Similar to the last chart we looked at, we like the upward trend that's showing up in this one.

It was three-for-three on Friday as far as unexpected economic data was concerned. In the final report on the day, business inventories showed the first positive month in over a year. Inventories increased by 0.2% in October, which was above the expectations that were calling for a decline of 0.2%. Keep in mind that the previous report showed a drop of 0.5% in September. If retail sales numbers continue to rise, this should cause businesses to continue adding new inventory. This increased demand should also lead to a drop in the unemployment rate. It's really quite an intertwined circle with aggregate demand and supply.

The dollar was able to move higher along with stocks on Friday. This hampered gold, which fell $6.30 on the day to close at $1,119.40 on the final trading day of the week. At the same time, oil continued to lose steam. It dropped for the eighth straight trading session when is gave up $0.67 to finish the week at $69.87 a barrel on the New York Mercantile Exchange. This amounted to a 7.4% loss for the week as demand continues to be weak for crude.

Friday's Economic Reports

The Dow Jones Industrial Average made it three straight winning sessions on Friday when it climbed 65 points. This helped the index move up 0.80% on the week when it closed at 10,471. This was the second straight weekly advance for the large-cap index and pushes the Dow up towards its resistance level near 10,500 on the daily chart. Let's keep a close eye on this barrier as we head into expiration week.  

The S&P 500 also rose for the third straight trading day, but wasn't able to make it back into positive territory for the week. However, its 4 point advance did help the index make it up to the 1,106 points by the time the closing bell rang on Friday. On the daily chart, the S&P 500 remains well below its resistance in the area of 1,120, but is now back above its rising 20-day moving average (light blue line). Let's see if it can continue to climb next week and push back towards its high for the year.

The Nasdaq Composite couldn't hold onto its gain on Friday. Instead, it slipped a half point on Friday. This was the tech-laden index's first loss in three days and caused the Nasdaq to finish the week with a 4 point loss when it closed at 2,190 points. However, its chart is similar to the Dow's in that it's sitting just below its high on the year and could easily push through this resistance at any time. Let's keep a close eye on this barrier to see if it continues to be a difficult resistance barrier for the Nasdaq.

After running up to its 50-day moving average (red line) earlier in the week, the VIX (CBOE VOLATILITY INDEX) has since reversed its trend and has been falling. It declined 0.73 of a point on Friday to finish the week at 21.59 points. Let's watch to see if the 50-day moving average continues to be tough resistance for the VIX.     

It certainly hasn't been the smoothest cycle as far as getting filled in spreads this month, but since getting into them, it's been fairly smooth sailing. While the indices haven't exactly been on fire, they have been either moving sideways or higher. This is exactly what we want to see with spread trading. The other thing we love to see is the drop in volatility like last week. This has helped the option premiums dry up even faster, causing the values in our spreads to drop precipitously. The best we can hope for is the same exact trading environment over the next week. With that in mind, let's take a look at how our spreads are sitting heading into the final week of the December option cycle.

RUT 500-490 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

RUT CLOSED AT $600.37 ON FRIDAY (100.37 points away from our put spread)

Profit potential of $40.00 per contract

Contingent Stop Order set at $505.00

RUT 540-530 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

RUT CLOSED AT $600.37 ON FRIDAY (60.37 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $545.00

The RUT continued to test its 50-day moving average (red line) during the final two trading days of the week but was able to hold above it on Friday's close. After bouncing off its 50-day moving average on Friday, the small-cap index was able to climb $4.99 on the session to finish the week at $600.37. While this was a good way to finish the week, the RUT did lose 0.4% over the past five trading sessions. Despite this, both of our spreads are sitting in great shape heading into expiration week. Let's keep a close eye on the 50-day moving average this week, but not get too concerned unless the bottom falls out of the Market.

OEX 465-455 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

OEX CLOSED AT $513.66 ON FRIDAY (48.66 points away from our put spread)

Profit potential of $49.00 per contract

Contingent Stop Order set at $467.50

OEX 485-475 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

OEX CLOSED AT $513.66 ON FRIDAY (28.66 points away from our put spread)

Profit potential of $35.00 per contract

Contingent Stop Order set at $487.50

After a tough beginning to the week, the OEX really turned things around on the final three trading sessions. It reversed nicely at its $505 support level on Wednesday and then continued moving north over the final two trading days. On Friday, it climbed $1.78 and finished the day back above its 20-day moving average (light blue line) on the chart. Let's see if it can continue moving up the chart this week. Heading into expiration week, we couldn't ask to be sitting much better in both of our two put spreads. Let's just sit back and enjoy the ride.  

GOOG 550-540 BULL PUT SPREAD (15 Contracts entered on 12/07/09)

GOOG CLOSED AT $590.51 ON FRIDAY (40.51 points away from our put spread)

Profit potential of $40.00 per contract

Contingent Stop Order set at $552.50

Google nearly hit a new high for the year on Friday when it climbed to a peak of $594.75 intraday (52-week high stands at $594.83) before reversing. The stock finished the day on Friday down $0.99 at $590.51. While it wasn't good to see the stock finish the day lower, we're still sitting in great shape in our put spread with a cushion of over 40 points with only one week to go. The stock has received a lot of attention lately regarding its planned launch of its own phone, which should help to keep propelling the stock higher in the near-term. This should help us avoid any stress in this spread the rest of the cycle.

As always, Trade Happy and Trade Smart

The Market moves higher, but still lacks much conviction. The Market is just limping along, whether it's due to traders locking in big gains on the year or some fear still lingering over economic issues or credit concerns. Of course this is fine with us because our profit is the same no matter if stocks drift sideways or move higher. With put spreads, we just don't want to see a move straight downward. As long as we avoid that, we should be sitting just fine.

Although it was quite day for economic data, one report that was released caught the Street a little off-guard.....in a good way. The wholesale inventories reversed for the first time in the last 13 months with its first month-over-month increase. The inventories rose by 0.3% in October, easily surpassing expectations. Heading into the release, analysts predicted another decline in stockpiles. This time, they were calling for a decrease of 0.5% for October. An interesting statistic on briefing.com showed that only two out of 35 economists surveyed had expected any type of increase last month. Now that says something.

Graphic from Briefing.com

Remember, this is another one of those pieces of economic data that is a telling sign for the business environment. The rising wholesale sales and rising inventories signal that companies are becoming more confident of future demand. Due to this, they are increasing inventory levels, which should help spur employment numbers in upcoming months if this trend continues. That's the key as far as we're concerned. We need to see a few months of back-to-back gains to get us excited about an economic recovery. Of course, we've been saying this a lot about a lot of economic data points. But then again, this is a fairly common belief among economists. Even with this in mind, it's hard to ignore the trend that's taken place over the past few months. Take a look at the improvement showing up on the table below.

The whole key to this data is the sales figures. After all, sales will drive all other aspects of the economy. Unless consumers are spending, it's difficult for companies to increase production and slow down with the downsizing that we've seen over the past year or so.

Another drop in demand caused crude to continue dropping after the Energy Information Administration released its weekly inventory report. According to government data, the country's oil consumption fell to its lowest level since mid-summer. With falling demand and another jump in supplies, traders continued to hit the sell button for oil. It declined another $1.95 a barrel to finish the session at $70.67 a barrel on the New York Mercantile Exchange. In an odd correlation, the dollar also struggled on the session.

In corporate news, an analyst upgrade of 3M helped the Dow Jones Industrial Average move higher. There were also news reports regarding Bank of America and Citigroup paying back TARP funds, but it's hard to say that had much influence on the Market.

Today's Economic Reports

The Dow Jones Industrial Average traded lower this morning, but was able to finish the session up 51 points at 10,337. This comes after the large-cap index struggled on Monday and Tuesday. While the index has come off its highs from last week, today's price action does give us a little bit of hope that we'll see a move higher towards the end of the week. Of course, this probably will have a lot to do with the initial claims number coming out tomorrow morning before the opening bell.  

The S&P 500 also turned in a 4 point gain today when the index closed at 1,095 points. Just like the Dow, the S&P 500 has struggled so far this week. It appears that the resistance in the 1,120 point area was just too difficult for the index. But after today's reversal, there's appears to be some buying starting to come back into the Market.    

The Nasdaq Composite also turned the tide today when it advanced 10 points and finished the trading day at 2,183 points. Today's turnaround helped the tech-laden index stay above its 20-day moving average (light blue line) on the chart and has it within striking distance of its high on the year. Let's see if it can get back to that area later this week.  

The VIX (CBOE VOLATILITY INDEX) made a big move higher yesterday, but has now run into resistance from its 50-day moving average (red line). Although it moved above that mark during today's session, it finished the day back below it. By the end of trading, it was down 1.03 points at 22.66. But if there's anymore selling the rest of the week, this index will likely be moving north from here.    

The selling at the beginning of the week finally helped us get some easy entries into our newest put spreads. We felt like it was about time. It's been one heck of a challenge for our fills this cycle, but now we feel a lot better with three more excellent spreads working this month.

As we said in the first paragraph of the newsletter, we're fine as long as we don't get a week and a half of straight selling. We're playing the odds and over time we seem to do quite well. While it's always tough to dip your toes back into the water after encountering a rough month like November, a nice little profit this month will always help to start healing the wounds. For now, let's take a look at how we're sitting in each of our put spreads.

RUT 500-490 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit potential of $40.00 per contract

Contingent Stop Order set at $505.00

RUT 540-530 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

Profit potential of $35.00 per contract

Contingent Stop Order set at $545.00

Just like the major indices, the RUT is lower on the week. However, the small-cap index has managed to hold above its 50-day moving average (red line) on the chart, which is very good news for our two put spreads. On the upside, the index has not been able to hold above its nearest resistance level in the area of $606 on the daily. Let's see if it breaks above this line later this week or falls below its 50-day moving average. A break in either direction would be a significant move for this index. In today's session the index moved up $0.33 to finish the session at $598.03. This gives us nearly 60 points of breathing room in our new put spread and almost 100 points in our other position. We like where we're sitting in both of these positions.

OEX 465-455 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit potential of $49.00 per contract

Contingent Stop Order set at $467.50

OEX 485-475 BULL PUT SPREAD (15 Contracts entered on 12/08/09)

Profit potential of $35.00 per contract

Contingent Stop Order set at $487.50

The OEX turned in a much better performance today with its gain of $2.30, taking the index up to $509.33. However, it wasn't smooth sailing the whole session. The OEX fell to its nearest support level in the area of $505 before it was able to reverse and finish the day higher. Just like the RUT, let's see how the OEX trades the rest of the week between its nearest support and resistance level. As long as it stays above that $505 level, we like how our put spreads are sitting. At the same time, let's watch its rising 50-day moving average (red line). We'd like to see this continue moving up to provide some more support for the index.  

GOOG 550-540 BULL PUT SPREAD (15 Contracts entered on 12/07/09)

Profit potential of $40.00 per contract

Contingent Stop Order set at $552.50

Unlike our other two spreads, our Google position is actually up on the week. The stock might be drifting sideways, but it has given us three green candles so far this week. Nothing would make us happier than to see two more finish out the trading week. In today's session, GOOG climbed $1.97 to finish the day at $589.02. On the chart, we like the fact that it has remained above its 20-day moving average (light blue line) and appears poised to retest its high for the year at any moment. Let's see if it's able to do this over the next couple of sessions. With a cushion of almost 40 points in our put spread, we shouldn't have any worries in the near future.

As always, Trade Happy and Trade Smart

The Market moved around just enough for most of our auto traders to go one for three with our new spreads. Our Google spread got most of the fills today while our other two trades are continuing to be a little difficult this month. Let's keep the orders the same for tomorrow and see if we can get another round of volatility to help us out. We'll keep the Google spread listed below for only those members that were not filled today. For everyone else, let's see if we can get the two remaining put spreads filled on the RUT and OEX to cap off this cycle.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders. These alerts only apply to those members not filled on Monday.

RUSSELL 2000 INDEX (RUT)

OPENING 540-530 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 540 strike price

Buy 15 December Puts at 530 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $545.00.

S&P 100 INDEX (OEX)

OPENING 485-475 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 485 strike price

Buy 15 December Puts at 475 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 $487.50.

Google Inc. (GOOG)

OPENING 550-540 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 550 strike price

Buy 15 December Puts at 540 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $552.50.

It felt like a case of "sell the news" on Friday as stocks surged after the opening bell but then gave most of the gains back by the time the closing bell rang. It was all good news on Friday morning when the non-farm payrolls and the unemployment rate were released. The optimism flowed through the Market with stocks firing higher right after the opening bell rang. However, the optimism started to wane around mid-day when the indices started to give back most of the gains. While this was not encouraging to see, the Market was able to finish the session higher at the closing bell.

It was the pinnacle of the week as far as the economic reports were concerned. The good thing about Friday was that the reports certainly lived up to all of the heightened anticipation. We often call the non-farm payrolls the big enchilada because it's always extremely influential as far as the stock market with its gauge of the employment condition of the economy. On Friday, it told us that far fewer people lost their jobs last month, as well as, the previous two months.

According to the Labor Department, employers cut only 11,000 jobs in the month of November. This was the best reading in two years and left hope that perhaps we'll see jobs being added sometime in the near future. At the same time, the government revised the previous two months upwards. In the month of October, only 111,000 jobs were cut according to the revised numbers.

Perhaps it was these revisions that helped explain why the unemployment rate was anywhere close to as bad as the Street was expecting on Friday. Heading into the release, economists had predicted another climb in the unemployment rate. However, the actual number came in at 10% for the month of November. This was down sharply from the 10.2% in October and left many wondering if perhaps we've seen the peak in the unemployment rate. We remain doubtful but this is certainly a step in the right direction.

Of course, the good news on Friday has some traders talking about the possibility of the Federal Reserve raising interest rates sooner than expected. This is because once the economy starts to bounce back, we're expecting inflation to rear its ugly head. To combat this, the Fed would need to cut off the easy money and raise rates to fight the cost of rising prices.

Again, we believe that we're probably a ways away from this as well, but these are the conversations that are taking place after the good news in the reports. Unless the economy is adding jobs consistently, we doubt we'll see a move in this direction out of the Central Bank. However, it was interesting that on Friday, traders on the Chicago Board of Trade had predicted the likelihood of a rate hike next June at 68%. This was up from 42% just one day earlier.

The easing of the fear was evident in the gold market on Friday with the shiny metal plunging. It was the largest decline in over 20 months for gold as it shed $48.60 to finish the week at $1,168.80. As one would expect, this meant very good news for the dollar. The greenback soared against rival currencies, posting its largest one-day gain against the yen this year. It also hit its level against the euro in over two weeks.

The strong dollar also sent oil down for the third straight session. Crude tumbled 1.3% to finish the week at $75.47 a barrel on the New York Mercantile Exchange. This locked in a 0.5% loss for crude on the week thanks mostly to the bearish inventory report released on Wednesday.

Today's Economic Reports

It was one heck of a swing on Friday for the Dow Jones Industrial Average. The large-cap index surged more than 150 points shortly after the opening bell on Friday. However, by early afternoon it was back in the red as the volatility kicked up intraday. By the time the closing bell rang, the Dow was up once again as it locked in a 22 point gain on the session.

The S&P 500 fared twice as well as the Dow on Friday with its gain of 0.55%. This amounted to a 6 point gain in the index, taking the S&P 500 up to 1,105 points at the closing bell.    

The Nasdaq Composite definitely turned in the best performance on Friday with its 21 point gain. The tech-laden index was much higher during the session, but was still able to walk away with a 0.98% gain at the close with its closing price of 2,194 points.

The VIX (CBOE VOLATILITY INDEX) continued to fall on Friday as the optimism in the Market improved. The "fear index" shed 1.21 points on the final trading day of the week. This left the VIX at 21.25 points at the closing bell.   

Once again it was close but no cigar. We've gotten a majority of the members filled, but we're still having a difficult time getting the rest of the auto traders finished despite all the whipsaw action we saw at the end of the week.

With the RUT and OEX put spreads, we can't bring those strike prices any higher because we have so many traders already filled in the current spreads. With the indexes moving out of the old range, it looks like we're not going to have another shot at those spreads. However, for Google we don't have anyone filled yet. Due to this, we can move the strikes a little bit closer which should help us with the fills.

While it certainly is getting a little frustrating this cycle, let's still try to not force these trades just to get fills. For tomorrow, we're going to make the adjustment for the Google spread. At the same time, we're going to add a new put spread on the RUT. The index led the major indices higher last week, which wasn't surprising considering the economy was showing signs of a recovery. Small-caps usually lead the way higher when this happens and it was a good sign that the RUT was climbing precipitously.

With our one put spread looking like a lock right now, let's ride that bullish momentum with another put spread at a higher level. As many of you know, we love adding layers to this index when it starts to move. We can still keep our strikes well out of the money, but still bring in a decent credit with not a lot of time left in this cycle.

Also for tomorrow, we're coming back with another layer on the OEX. With our other put spread also sitting in excellent shape, let's see if we can earn a little bit more on this index. We're going to come in with a spread under its major moving averages (including 50-day moving average) and previous support levels on the chart. These levels should help us out if there's any deterioration in the Market.

NEW TRADE ALERT (3)

Please Note: These are Day Orders and Limit Orders. These alerts are new spreads and apply to all members.

RUSSELL 2000 INDEX (RUT)

OPENING 540-530 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 540 strike price

Buy 15 December Puts at 430 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if stock reaches $545.00.

S&P 100 INDEX (OEX)

OPENING 485-475 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 485 strike price

Buy 15 December Puts at 475 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 $487.50.

Google Inc. (GOOG)

OPENING 550-540 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 550 strike price

Buy 15 December Puts at 540 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $552.50.

RUT DAILY CHART

OEX DAILY CHART

GOOG DAILY CHART

RUT 500-490 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit potential of $40.00 per contract

Contingent Stop Order set at $505.00

The small-cap index was on fire Friday with the RUT surging $14.01 on the session. The 2.38% more than doubled the nearest major index. With the RUT closing at $602.79, this leaves it back above its 50-day moving average (red line) on the chart and just below an old resistance level. If it can keep moving higher, it should be headed back towards its high on the year, near 625 points.

OEX 465-455 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit potential of $49.00 per contract

Contingent Stop Order set at $467.50

The OEX broke out of its range on Friday hitting a new intraday high on the year. However, it wasn't able to hold at this level in the afternoon. While it wasn't able to hold there, it still managed to gain 1.91 points on the day and close at $513.89. This gives us a cushion of near 50 points in this spread with not a lot of time remaining. We should be able to sit back and relax in this position for the time being.

As always, Trade Happy and Trade Smart

We got the pull-back that we wanted today, but it just wasn't quite enough. Let's stick with our current orders and see if we get a farther retracement tomorrow. If so, that should get everyone into all of the spreads. It certainly has been one of the most difficult cycles for getting fills, but we are being extra cautious this cycle. Let's see if we can get paid for using our patience.

NEW TRADE ALERT (3)

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

RUSSELL 2000 INDEX (RUT)

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

Sell 15 December Puts at 500 strike price

Buy 15 December Puts at 490 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

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

S&P 100 INDEX (OEX)

OPENING 465-455 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 465 strike price

Buy 15 December Puts at 455 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 $467.50.

Google Inc. (GOOG)

OPENING 540-530 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 540 strike price

Buy 15 December Puts at 530 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $542.50.

Stocks sputter after financials and energy plunge. A few downgrades in the financial sector and a jump in oil supplies proved tough resistance for the indices today. While they did finish the session mixed, all three major indices appear to be bumping up against some stiff resistance levels on the daily charts. But before we get to the technicals, let's take a look at what transpired today.

With anticipation starting to rise over Friday's non-farm payroll number, the Street was carefully dissecting this morning's ADP private sector employment report. Heading into the release this morning, the Street was looking for a loss of 150,000 jobs last month. However, the actual number came in higher than expected with a loss of 169,000 jobs last month. While this is certainly not good, it was better than the previously revised number of -195,000 jobs lost in the prior period.

The emphasis on today's report is that traders use the ADP as a barometer for how Friday's more-important data should look. After today's ADP number, Friday's loss might dampen the expectations for a smaller loss on Friday. Currently, consensus is calling for a loss of only 150,000 jobs on Friday. The Street is also looking for the unemployment rate to climb to 10.3% from the last reading of 10.2%. Let's buckle up tight because it could be an exciting session on Friday.

There was a bit of good news this afternoon from the Federal Reserve when it released its Beige Book of economic indicators. The report updates the economic conditions from its 12 districts from October to November. According to today's report, the conditions have improved modestly but there are some concerns about the commercial real estate sector.

It was another trading day and another record for gold as the shiny metal closed above $1,200 an ounce for the first time. Even with the dollar continuing to gain strength, investors have flocked to gold, helping it to gain $12.80 in today's session. That amounted to an increase of 1.1% with it settling at $1,217.30 an ounce.

While gold was headed higher, oil was dropping. This came after the weekly Energy Information Agency reported a rise of 2.1 million barrels last week with demand falling. At the same time, gasoline demand dropped by 1.6% last week according to the government data. This news caused crude to give back $1.77 a barrel to settle at $76.60 on the New York Mercantile Exchange.

Today's Economic Reports

The Dow Jones Industrial Average was hurt this afternoon by a struggling Bank of America stock. Evidently, the Wall Street Journal reported that two prospective CEO candidates have suggested that the company be split up. The caused the stock to drop 1.5% in today's session, along with plenty of other struggling financials. This caused the large-cap index to fall for the first time this week. It lost 18.90 points and settled at 10,452. On the chart, the Dow is running into some tough resistance from the 10,500 point mark. This will continue to be the true test for the bulls over the next two trading days. On the downside, let's watch its 20-day moving average (light blue line) very carefully the rest of the week.

The S&P 500 wasn't as weak today with the index actually gaining a fraction of a point. The index closed up .03% at 1,109 and made it three straight green days for the S&P 500. However, the index appears to be bumping up against resistance once again on the chart. Let's see if this level keeps the index below it or whether the S&P 500 can finally break above it.   

The Nasdaq Composite had the strongest session out of the three major indices. The tech-laden index rose 9.22 points to finish the day up .42% at 2,185. The index made it four out of the last five days with green finishes. Let's see if it can continue marching higher the rest of the week.   

After dropping right through its 50-day moving average (red line) yesterday, the VIX (CBOE VOLATILITY INDEX) kept moving south today. It shed 0.80 of a point to finish the session at 21.12 points. On the chart it looks like it's headed back to the 20 point level. If so, that would be good news for the bulls.  

We had pretty good success with fills on Monday, but the next two sessions proved a little more difficult for getting everyone into the new positions. We're going to keep the same strike prices for the RUT and OEX for tomorrow along with the same trade (that we adjusted last night) for Google. For those members that are filled, we like how we're sitting. For everyone else, let's continue to be patient with these spreads tomorrow and see if the trades will come to us.

With the indices bumping up against some strong resistance levels on the chart, we might just get that retracement. Of course, the wild card later this week will be the release of the non-farm payroll and unemployment rate. These two reports should cause a fairly substantial move in one direction or the other. Because we still have three and a half weeks to go in the cycle, we still have some premiums out there for new trades. But first, let's get everyone into these three before we move on to additional spreads. As usual, let's keep these as day orders and then reevaluate if we don't get any fills tomorrow.

NEW TRADE ALERT (3)

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

RUSSELL 2000 INDEX (RUT)

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

Sell 15 December Puts at 500 strike price

Buy 15 December Puts at 490 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

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

S&P 100 INDEX (OEX)

OPENING 465-455 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 465 strike price

Buy 15 December Puts at 455 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 $467.50.

Google Inc. (GOOG)

OPENING 540-530 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 540 strike price

Buy 15 December Puts at 530 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $542.50.

RUT DAILY CHART

OEX DAILY CHART

GOOG DAILY CHART

RUT 500-490 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit potential of $40.00 per contract

Contingent Stop Order set at $505.00

OEX 465-455 BULL PUT SPREAD (15 Contracts entered on 11/30/09)

Profit potential of $49.00 per contract

Contingent Stop Order set at $467.50

As always, Trade Happy and Trade Smart

The big move higher today made it difficult to get any additional members filled in our spreads. With quite a few members filled already on the RUT and OEX spreads, we want to keep the strikes the same for tomorrow. However, let's lower the credit by a nickel on both of those orders to see if that helps. Of course, we're going to need a pull-back to help us get filled in those spreads. For Google, let's raise the strike prices one level and drop it by a nickel also. We'll see if this does the trick for tomorrow.

NEW TRADE ALERT (3)

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

RUSSELL 2000 INDEX (RUT)

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

Sell 15 December Puts at 500 strike price

Buy 15 December Puts at 490 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

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

S&P 100 INDEX (OEX)

OPENING 465-455 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 465 strike price

Buy 15 December Puts at 455 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 $467.50.

Google Inc. (GOOG)

OPENING 540-530 DECEMBER BULL PUT SPREAD (15 contracts)

Sell 15 December Puts at 540 strike price

Buy 15 December Puts at 530 strike price

Total Credit 0.35 per contract

Potential Profit $525.00

Once Filled, Use a Conditional Order: Use a Stop or Buy Market if Touched Order if the index reaches $542.50.