The Plunge Protection Team

For those of you that do not know of PPT, let me introduce you. The Plunge Protection Team are the institutional investors that always struggle to hold or build the market, to "prop it up." Sure enough, the boys were in action yesterday while Bernie went to jail and they promptly led the market up in "window dressing" for the end of the second quarter so that by early afternoon the Dow had topped at 8533, 8573 on the "theoretical Dow."

This is a classic support line that has turned to resistance and we saw the market struggle here for hours, simply barely moving.

Many new subscribers ask: Should I buy both positions, call and put, when you offer them?

The answer is this: profits in option trading take place by "the sum of the parts." We've had some great daily successes on trades for over 21 days now, with only one stop loss, and it's important to always sometimes lose money.

Huh?

That's right. Not all signals will be profitable, but played right, with the "sum of parts" the majority will be, and with profits to offset any losses. This is why we are so strict in our use of # of days stop loss. Remember, we NEVER hold a position longer than 4 days.

Our stop loss method is simple: The day after you buy the option is day #1. Count 4 days out and sell, no matter what. If you make a larger second buy to the option, the day you buy is recalculated to the morning of the next day, and 4 days out from there.

We find the market typically has enough retracement and whipsaw within this time period to allow profitability.

It's the end of the month. Sell off for institutional investors, or prop up for balance sheets. It's been an unusual quarter, in that most institutional investors are those that have moved the market UP so dramatically, after waiting for consolidations to buy in that never occurred until just recently. This is a week filled with data, study your economic calendars carefully, and this data can act as event trigger, as it has been, to create action in the market.

But make note that it's a shortened trading Holiday week, and that the volume and VIX have both been declining. Declining VIX means less FEAR, but it also means less volatility, and we believe after a bottom test we can have much more euphoric upside.

Yesterday was a great example of an "easy buy to the position." We recommended a new buy on OXBGH July 440 at a best buy below prior day close, and the option was available for as low as 3.20 within 45 minutes of opening.

It could have sold by noon, and did for many traders, to highs of 4.30 to 4.60 by 1.30 p.m. for up to a 44% return in hours.

We continue to hold the July 415 Put as our hedge.

Thanks to subscriber Cheryl, who helped find the URL link for the great article recommended yesterday about Goldman Sachs. You must read this article to understand Bernie, Paulson, and all the slime that are in cahoots.
Here's the link to the GS article:

http://www.scribd.com/doc/16763183/TaibbiGoldmanSachs


Unemployment rates are a wonder. And America continues to "believe" what is told us.

The real figure might be anywhere between 15% & 30% if you take into account the cuts in worked hours and the cuts in pay rates.

If I used to get 25 $/h on a 40 hours per week basis and on my new job I'm getting $20 for no more than 30h I guess I'm 40% unemployed or underemployed.

Add those who just gave up altogether ... and it might not be that good.

Many large corporations fill in the gaps in employment by using contract personnel companies. Those are some of the first jobs to be cut when business is strained. Nowadays some very large corporations are wholesale terminating contractors.

This doesn't show up on unemployment data for those corporations. The contract people just get reassigned and pushed down the rungs into lower paying jobs.

As unemployment figures come out this week, assumed to be "positive" because they aren't worse, recognize within the upswing we've experienced in the market that the job market has worsened dramatically. I smile at the false facts of "employment," noting that over 71% of responding corporations have cut employee wages since January 09 an average of 23.1%

So here's a few other "facts", perhaps even more relevant:

Stink free underwear has been invented for astronauts.

46% of six to nine year old girls wear lipstick or lip gloss.


And from Level 3 subscriber NL from Israel:

"Hi,
I've noticed how helpful volume is in looking
at market behavior.
e.g on the 15 min chart of SPY I can clearly
see volume falling off while the chart rises.
In my thinkorswim charts I have set the volume
to be colored green bars for ascending prices
and red for descending ones, and I could see
that the green ones are generally falling while the red ones
stay the same and not low.
Therefore I bought puts on the SPY about an hour or two ago
also based on a head and shoulder formation visible in the last
2 months or so. It looks like today's resistance is where
the right shoulder is at, and where the price has been during
the last few hours.
Now I also read your email for today and saw that you have
also a bearish outlook so I was glad this confirmed my guess.
What do you think?"

Consolidation should take place to our Dow low projections around any economic data, and quarterly earnings will begin to come out. All is not so rosy. Trader NL is right with us!