Yesterday we saw classic flatlining throughout the day, pure hesitancy, only to see the crash protection team lead the market up to the 8080 top that we've hit again and again. Again, we saw 7840 lows, to 8080 highs, allowing tight profits yet again to both put and call.
We have been profitable on 7 signals this week.
We continue to hold only a first buy to the May put, and will take a second buy today (some may have taken this second buy yesterday) if the market continues to move up, and renew our stop loss on # of days, as the market is waiting for a move, and it will be large.
Which way? It's a market being held up by optimism and waiting for downturn.
Tomorrow is option expiry, the Dow has been up 10 of the last 12 years, with 1.2% advances in 2007 and 1.8% in 2008. We have also seen a market that has held at pivot lines through 4/15, struggling between a first top and a first bottom, and showing resiliency.
Consolidation has been held through 4/15 to support lines, which historically can mean that the market has formed a new and higher bottom test. That's good news for the bulls, if true, but the type of trading we've seen this week in such mild whipsaw that dual profits (put and call) have been possible. Yesterday pre market we saw futures fluctuate with no bias, yet another sign that new tops and bottoms ranges are being considered by the market.
With October's lows in mind, now support lines, watch carefully to see if the market tries to "hold" at these levels. Many traders recently have simply put "best buy prices" in and "limit sells" and not watched the market during the day more than once or twice. Although this eliminates the need for constant monitoring it does allow the market to fluctuate and for traders to take profits, and some traders have recently also been following our test method of buying above prior day close under certain market conditions.
This is a market with more bad news than good, but wanting to be healthy, wanting to come back. Remember, at current market tops and bottoms we are near where the "crash" first bottomed last year, and we now think it is is "good news". This is how perception does control the market, and how the psychology of the common man becomes one as we begin to "believe".
This is much like WMD (Remember Iraq?...remember weapons of mass destruction?). When we first heard this, some believed. By the middle of the WMD Bush games over 76% of Americans believed there were WMD in Iraq, EVEN after it was proven there were not. We are a simple people to fool.
Mob psychology and the madness of crowds in action, and it may be happening in the new formations in the market.
Bernanke is right now trying to "open" the innuendo in some of his moves, and our compliments to less "power" and more transparency:
http://online.wsj.com/article/SB123975237751018765.html#mod=testMod
Successful traders use this rule: it does not matter what should be, it matters what is.
And a Floydian thought on free enterprise and big government: There is no doubt that capitalism works, and that free enterprise can control the fluctuations of the market. However, when there are no regulations and the majority of citizens do not gain in income, and a small % of the populace controls all the wealth, we are far from capitalism, and far from free enterprise. For those that say "let it all work itself out" there is not the understanding perhaps that the repercussions of it "working out" could create a nation of homeless people.
Stop reading newsbites about socialism, and the "great American experiment". We are righting the wrongs of many years of GREED.
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