Recent market gyrations of 300 point moves up or down within a few days has not happened since the Great Depression. Remember this as you trade.
When the market begins to gyrate upwards on good news on, as an example, GOOGLE earnings (4/17/2008) and buyers begin to move the Dow to near 13,000 euphoria begins to build. For OEX option traders this is a great time, if disciplined in their studies, as WHAT the market does is irrelevant to index option trading. Unlike stock investments we are watching a short period, typically no longer than 21 market days, and recently, as quick in movement for 600 point moves in the market of 7 days.
Yesterdays' moves allowed us a two buy entry to the May655P.
We shared the fears of subscribers intraday after our alert, yet again trying to point out that this is option trading, thusly highly volatile, and is always high risk. When I do as well as I've done in my picks, note that I will fail us sometimes....it's part of the game. And...I don't think yet that it will happen on this trade.
April 23rd, 1999 was the first month ever to gain 1000 Dow points. Just think about this as you consider the massive moves that have been occurring in the market over the past 6 months. What has changed, and how can you take advantage of it?
Now, to teach again...it's best to share some afternoon dialogue we had with traders, which sum up well how I saw the market yesterday.
1. “Your email outlining the concerns of some of your subscribers is somewhat refreshing. I remember those days. Greed going to slaughter a lot of these guys who think you do nothing but win. Some of these guys you quoted in the alert are making bucketloads of money. I was telling Dave last night that, if these people choose not to follow the rules with exactness, the market is going to hand them their rear end on a platter. Although I think we are solid on the current trade, it is just a matter of time before some of these guys learn what I learned months ago - MANAGE YOUR RISK. No fear, no greed, just manage your risk!!!”-Advanced Mentoring Client, SK, Arizona
2. From Advanced Mentoring Client PC from Germany:
“Hi Floyd, Thanks for this. I had promised myself I would never send you a "what do I do now in panic" mail. I'm helped in this attitude by knowing that you will be cooly placing your 2nd buys, so OK. My whole approach is not just to do what you do but understand why you think what you think. I hope I always ask you to teach me what you think not what to do? If I can think like you I will have no option but to do what you do.
Floyd - understood and I will try to think and help here.
I have spent a lot of time over the last month working at pivots and improving timing and finished the day yesterday in far better condition and with confidence. I hope all your subscribers recognize that you could never teach it, it can only be learnt and all you can do there is give pointers and say "stay with it". Bang away at something long enough and it has to give. So, it is coming for me. I only ended up working one side of the straddle yesterday, it was an interesting exercise in emotion and attitude as it was the put side I worked yesterday. I did profit on the call the day before. I came through in the end yesterday and I could still see pivots at work. If they were at work today they quickly crumbled.
Floyd - We were caught up today in a semi conductor and tech rally, and institutional buyers taking new inventory. This type of play often happens around the FOMC
With paper loss approx half all April's gains after 2nd buy today, as I write, I will keep my head cool from your lead. Your penultimate sentence above is quite acceptable in principle but the possibility of loss on this trade is only brought about by the market continuing to rise rather than fall over the next 4 days, right?
Floyd - Right, and I think it unlikely. A shift downward has a 65% potential in my mind, before a stronger upside return.
This leads to some questions.
I haven't been able to see what kept the house market afloat for about the last 4 years of it but it kept creeping up those 4 years and, it seems in economics there is no gradual this or that, greed and fear have no grades? Reading all the bank woes during the end of 2007 beginning 2008 one could be forgiven for believing the only thing that's keeping the wall street suicides below the 1929 level is that there are less gas ovens around these days for people to get their heads in - what is pushing the market up now??!! Just opinion? Scraping down interest rates will only affect what comes after the decimal point.
Floyd - Euphoria. The market moves today will slow, as they did yesterday and moved back to the 50 day moving average, and institutional trades entering the fold. Semiconductors rallied, techs rallied, and the market took off.
Why the crash down late yesterday, then the push up today without the crash? Do you think anything to do with manipulation?
Reading about Wyckoff I wondered if the pretty much flat line from Monday to early yesterday (now also looking back to the first 8 days of April) were large operators accumulating? They used the interest rate micro-change yesterday (trojan horse) to place sell orders at stepped up prices and the market leapt. I could follow that line of thinking until the Dow dropped 200 points in 2 and a half hours on the same day. With the same leap up today, appearing even stronger than yesterday, apparently based on an oil company saying it had done less well than they thought but still good, I lost the thread. I would be with Wyckoff all the way on manipulation I'm just weak on the mechanics of it and am dying to improve on this one!!
Floyd - This is exactly right. Couple in the FOMC and what is bad news to the average bear, that they will now control interest rate drops, and the first moves down. Typically around the FOMC we see "exhaustive gaps" that are two way.
So, the 500 point drop is still on the cards djya reckon? Hold steady with the Put?
Floyd - Yes.
Is it the manipulation campaign "phenomenon" which would bring that about?
Floyd - Yes.
Did you ever have the opportunity of meeting Richard Wyckoff?
Regards – PC – Germany
No, my Dad was his sole licensee back in the 1920's and worked with him for many years. I only know what I know from my Dad's training, and courses that he taught.
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