An Important Lesson

The market is closed tomorrow for the 4th of July holiday. Trading will be very light today, as it was yesterday. The run up yesterday morning took back all of the prior day losses, and allowed no entry to the new call. Traders were able to take an easy first entry to the July 420P, as a new buy, as low as 3.00. This position will act as our new hedge, and we will hold through the holiday weekend if necessary. Any trade during the day today to the call should be sold by day end. Many day traders reported good profits on the new 420P, buying at 3.00 to 3.20 and selling to 4.20 by 3.45 p.m.

There is an important lesson. Traders that bought the put following resistance lines were able to sell profitably on a day that was UP and euphoric.

The Dow gained 838.08 for the quarter, and Blue Chips alone gained 11% as risk aversion became the mainstay. Institutional traders continue to push the market in buys, and this was the best quarter since 2003.

Okay, that's all true, but the market is at 8550, and the meteoric rise helped only a few. We saw the market hesitate again by early afternoon and give up half of its gains, again in the struggle from 8550 area to 8450.

It's simply a head and shoulders formation on low volume that will either burst past resistance lines and potentially run to 8750 or higher, OR a market finally willing to consolidate healthily. Floyd considers moves of over 220 points down in a day a sign of consolidation, if on high volume.

We recalculated the Dow midday and saw the market struggle at the new R2, 8574, before hesitancy began.

Today is a big day for reports. Employment Situation and Jobless Claims at 8.30 a.m, and Factory orders at 10 a.m. We believe it will depend upon the mood of the market as to how this "data" is interpreted.

Unemployment is a key issue in Floydian economics, and we believe the real picture is not being painted at all.

And real estate issues are NOT over: Study this: http://www.bloomberg.com/apps/news?pid=20601087&sid=aGDhz5w8ODrY

In our Blue Chip Option portfolio we own SRS, a double shorting inverse fund. We believe commercial real estate is next to fall.

Matt Tabbibi and the great Goldman Sachs expose made CNN Money today, it's good to see some true journalists hitting the newsblips.

And...from subscriber Cheryl...

"Floyd,

This is a good picture of employment / unemployment thru the years - play the animation

http://tipstrategies.com/archive/geography-of-jobs/

Cheryl"

Subscribers: Study this great link as it helps us get a feel for unemployment. Despite consumer sentiment, unemployment will live with us, as these people spend less, and we are now saving more.
This means the moving of money is slowing. It is key to capitalism.

Have a Great and Happy Fourth of July. Our next alert will be for Monday July 6th. Be well and do good.