Thursday Failure – Big Bounce Lines Falling Short Ahead of Quad Witching

Last week, we set our 5% Rule's™ "strong bounce" goals for this week at Dow 16,300, S&P 1,860, Nasdaq 4,300, NYSE 10,400 and Russell 1,190 and yesterday we finished at Dow 16,222, S&P 1,860, Nasdaq 4,307, NYSE 10,359 and Russell 1,195 - not bad for estimates made a week ago but still not good enough to flip us bullish again.

Of course, we knew that yesterday morning, when I called for shorting the Futures at 16,300 on the Dow (/YM), 1,865 on the S&P (/ES), 3,700 on the Nasdaq (/NQ) and 1,200 on the Russell (/NQ) and this morning we're at 16,100 on the Dow for a $1,000 per contract gain in 24 hours, 1,848 on the S&P for +$850 per contract, 3,665 on the Nasdaq for +$700 per contract and 1,187 on the Russell for +$1,300 per contract there.  

If you'd like to get alerts on these trades sent to your inbox or to get these posts and trade ideas before the markets open or live picks during market hours - you can sign up HERE.  

In Friday's post, we were shorting the S&P Futures at 1,870, that's another $500 per contract if you were paying attention at the time!  In Tuesday's Live Trading Webcast (replay here), aside from reiterating our Futures shorts, we also added the WYNN March $230 puts at $1.05 at about 1:30 pm and they closed the day yesterday at $2.40 – up 128% but we took the money and ran at 65% – we're not greedy…

They aren't all shorts.  We went long on oil (briefly) yesterday morning and, on Tuesday morning, I pointed out 5 long trade ideas - right in the morning post - and we took the money and ran yesterday with 4 of 5 closed out as winners and the CMG April $620 calls at $8 closed yesterday at $17 – up 112% in two days.  This is why we can be comfortable going back to CASH!!! in a choppy market – we can always find fun things to trade – in any direction!

Long-term, we still had plenty of bullish trade ideas in our Webcast, as well as during our Member Chat this week – we're not long-term bearish – we're simply looking for a correction and we expected the Fed to provide a catalyst for at least a small correction as we re-tested our strong bounce lines.  Now that we're in between weak and strong bounces (see last week's post for full set) – we simply have to sit back and see how the situation resolves.  

As you can see from Dave Fry's NYSI Chart, we're still well overbought with miles to fall (or consolidate) before we work of those conditions.  At the same time, our CASH!!! is making a comeback, with the Dollar ripping back to 80.40 this morning – so that sideline CASH!!! we've been recommending has gained 2% since last week – cash is an asset too and a perfectly reasonable thing to invest in when it's too cheap (something else we discussed last week).

I know I must sound like a broken record saying CASH!!! every day but don't you wish someone had done that for you in early 2008?  I'm not predicting an epic global breakdown that knocks 60% off the value of your portfolio but, since that's exactly what did happen just 5.5 years ago – forgive me for being just a little bit cautious when China is melting down and Russia is annexing the Ukraine and Europe's economy is still slow and our housing is dropping and retail is weak and Japan is raising their sales tax because their debt is unsustainable AND the market is up 40% from where it was just one year ago.  

4th Quarter earnings are right around the corner so, even if you are not worried about all this other stuff (and China is shaping up to be a real problem!), would it really hurt to wait a few weeks and see if earnings are keeping up with expectations?