A True Sell Off

Unemployment data was out early and futures dropped over 60 points prior to opening on Friday. Bloomberg news url link on our alert indicated rising oil (up $10.00 in one day), and lowered futures. Noting the "split bias" to put and call I would hope that most traders did not even take entry to the June650C on Friday morning.

What occurred Friday is a true sell off, with a 400 point drop after a 250 point rise the prior day.

If traders did take entry to the June650C it's likely it's our first loss in some time. Midday we issued a higher risk (40% noted) buy to the June630C, and one or two buys were made. Friday's sell off was a clear sign that false optimism may not be tolerated.

The USD declined, oil is priced in USD, and couple this with the horrible unemployment reports....if we were using our Alert before market opening you could see...the knife was already falling.

With this said, what we saw Friday in the early sell off shows the risk to this market. Nothing can seem to keep the market up more than a few days. Many subscribers wrote Friday, wondering how to buy on the downturn. I'll answer one key question best:

I personally do not try to catch a falling knife. There are times this works, or times that "breaking the rules" and following intuition can result in profits. Statistically one will do better always following a system that following the market lead.

Midday we issued a higher risk trade again to the June630C, which was promptly available at an average cost on first buy of 7.00. This is an example of a high risk contrarian trade that we'll now hold as our hedge as we walk the market open this week, and what happens after the kind of drop that we saw Friday.

Any market that can move 250++ points up in one day, and 340++ points down the following day shows an economy that is very very sick. And it's not just oil and real estate. It's much more pervasive.

From our subcribers:

"I just want to tell you something Floyd...I really appreciate you and the people working with you.

You guys are seriously changing my life...and it's not just financially.
I am learning so much about myself and just writing to you is therapeutic.
Thank you for listening.
Michael"

"Floyd, THANK you for telling me to ALWAYS sell for profits when you can get them on Thursday and to NOT BE GREEDY.

I sold my calls and made 17k. If I had held them just one more day my losses would have been staggering. You saved me so much money."-JW