EXIT LONG - 2:22PM

Big gain up into gap resistance.

PUT BUYING = BUY SIGNAL FOR DIA

Heavy put buying from 9:30-10:00AM was, I think, a function of heavy European hedging and selling into our market.

We want to do a fade trade here and go long and then reverse and go short if the trade doesn't materialize.

What we are seeing here is a global hedging hot potato decline. Russia gets hammered, for example, and sells stocks in Europe. Europe buys, then tries to unload in the US by selling here when we open. If we don't find a home for this new selling, then it will be "OPEN THE BOMBAY DOORS" and let it fly (drop).

So, at this point, we want to be long. Let's pick 1PM for entry. Use a stop of 0.50 DIA pts instead of 1 pt.

If stopped out with a 0.50 pt loss, then go short and risk 0.75 pts so our total risk is 1.25 pts.

If that starts to work, then just cover at the close AFTER dropping your stop down to breakeven after it is up by 1.00 DIA pt. Sound complicated? Not really. Read it again and again if you have to.

12:52PM EST NOW

CALL BUYING today was BEARISH (this morning)

I told all of my IM clients about this market setup today, which was positioned for a FALL due to several observations.

I simply can't continue to give away this information - it is extremely valuable and it is what I have taken years to learn and many losses along the way.

I am considering creating an account at Collective2 where you can follow the signals there and subscribe to the service and you can have an account auto-traded based on what I am seeing with the 3-D view of the market. www.collective2.com Once I get my log-in code I will alert you with a post here so you know how to find me.

Today's closing buy signal was more of a sign that the market had seen enough put-buying on Friday to warrant a strong base in place for today. However, if we test Friday's low tomorrow or later this week, then I will have to wonder how strong this current base is and then I may change my tune to suggest that we will violate the lows seen in the last month.

Let's take one day at a time with this strategy.

I am reading some great books lately - I imagine some of the pearls of wisdom will shine through to this blog.

Enjoy the day.

SIDE NOTE - One last thought - I am married to my wife, my kids, my family, my house, my responsibilities as a father, brother, son, and to God - so I don't have to be married to my investments. There are many ways to view the short-term nature of trading and its impact on the market itself and on ourselves as individuals, so I will assume that all of you are already aligned with short-term trading.

BUY SIGNAL: 3:50PM - exit at 4:00PM

This Is A Bull Market

The S&P500 has wiped out almost every financial firm that had leverage of greater than 10:1. Leverage in this case is the measurement of ROE/ROA. We don't have to delve deeply into financial statements to get these numbers, but it is fascinating that all of the firms in the S&P500 that were above that level are gone or merged or backed/bought by the US Gov't. SO, I COULD CONCLUDE that the leverage "in the system" has already been taken care of to a large extent.

The S&P500 is up 2% overnight here to get started for the week to confirm the "bull market".

Get ready for a busy day & week.

9:52PM Sunday Nov 9, 2008

BEARS ARE GETTING SQUEEZED (BUY SIGNAL)

This is a "squeeze the bears" day in the market.

Those who have overpaid for very expensive put protection are selling out their bets on lower prices and effectively putting a floor under stock prices today. I think what is happening is people who owned the puts are liquidating them and turning around with the proceeds and putting that money to work in the market. The successful pricing of the WFC 2ndary today at 27 is another positive sign for the market. Anything is interpreted as bullish news in a bull market. We can call this a bull market by some definitions. #1 reason - we have rallied 20% from the low. #2 reason - VIX peaked over 80. That will happen once a decade and it happens at bottoms. #3 reason - very low interest rates. #4 reason - very low investor sentiment implies that people have sold stocks down to their comfort level. #5 reason - massive mutual fund redemptions mean that the little investor is already OUT of the market now. #6 reason - all the markets of the world went down together, this was NOT a US-only decline. #7 reason - I'll think of another 50 reasons and put them on this blog - perhaps - stocks are cheap, very cheap and so-called "experts" fear now that the #'s reported by companies are not accurate.

Let's stop this line of thinking to explain this bull market and just get on with it.

Buy 88.72 last. 89.72 target. 87.72 stop.
Raise stop to breakeven after 1 hour (after 30 minutes raise to 88.22)

12:53PM

MORE BULLS AT THE OPENING

Call buyers showed up in the first 30 minutes of trading today to pay UP for Call options just in time for the stocks underlying their calls to plunge in value.

Well, I can presume that this is the perversity of the markets and the better question to ask yourself is "HOW DO I MAKE MONEY FROM THIS PATTERN?"

Due to other duties outside of posting to this blog, I missed posting a sell signal at this morning's opening 10AM trading window. Remember, we watch the first 30 minutes (9:30-10:00) to watch and wait for a trading setup.

Either way, at 10AM a very clear sell signal was in place and it worked for well over 1 pt down in the DIA.

As of 12:21PM now - we are inching towards a very low risk buy signal, much like yesterday's buy signal which was really just a resting period before the next leg down.

Either way, we can take a shot at this trade because it will work some of the time and enough of the time to warrant the risk taken.

Pay close attention to the next entry.

Be well.

12:23PM DIA 88.47 last