Thursday Thoughts

This market doesn't like to close at the lows.  Late in the trading day, with only a few minutes until the closing bell,  stocks hit their lowest levels.  The action looked ominous.  Perhaps the long awaited free fall for stocks would send the indices plunging into and after the market closed.  And then... the market did exactly what it's been doing since the March 2009 bottom.... it embarked upon an eye popping,  spastic,  furious,  spike-a-thon,  for no other reason than it could.   It's as if the market was laughing at the market bears,  the shorts, those betting for more downside  and saying... what takes you hours to construct I can rip apart in a matter of minutes.  Go back to sleep.

The question still lingers as it does with every other day the market sees a moderate decline in prices.  Is this the start of a significant pull back?  Has the market topped?

Is this the start of the end?  After months of relatively quiet trade, these .8% pull backs feel a lot more like the 3% pull backs of years past.   And yet we know tomorrow could bring the pink eraser out and make today feel like it never happened.    I do know a few things and in the midst of today's recap I will share them.

  • For one the range of the S&P500 continues to narrow.  I believe this is a set-up for that long awaited sharp move.  Down or up?  That is the question.

  • The bond market is is showing cracks.  The violent swings are not a sign of tranquility.  There is a tremendous amount of uncertainty and this could fester to uncertainty in the stock market.  Also the prospect of higher interest rates will spook the market.  The "Rate Rampage" as it has been dubbed.  We've seen this story before, and we know the ending... but trading through each chapter can be a challenge, especially if you aren't ready for it.  $TLT came back up to give former support a kiss goodbye.  Awww  so sad.


  •  The VIX is starting to break the wedge.  As prices narrowed the VIX was setting up for a big resolution, much like the $SPY is today.  The VIX earlier in the trading session broke out of the wedge.  This bears watching and we could be in the early stages of a move back over 15 and to 20 on the VIX.  That would imply lower stock prices, which of course will just be another buying opportunity, but again it will be a great trade down, and a great recovery.   Something that will be the current ping-pong ball consolidation we've seen for most of 2015

Finally a few more thoughts.

Biotech could be putting in a top of the megaphone variety.  This will make for a fabulous PUT trade.   June Monthly $335 puts for $1.35 sound about right.  Let's see how tomorrows Job report affects stocks early on, and if we get that likely pop... its on.

My $INTC and $HPQ trades hit paydirt today.  I shared both of these charts on the blog this week and at the end of last week as well as  Private Twitter,  in the chat room and via live audio, and this weeks market videos.  I was literally salivating over that $INTC chart.

and $INTC

And on to today's unusual option action recap.  Check back shortly for it.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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