Market comments for Nov. 18th, 2011

Today is Options Expiration for November so you should see high volume both at the opening of thew market today and also at the close. Troubles today in the Eurozone seem to be taking place behind close doors rather than in the press, so the Futures markets are up some as we go into the open. The economic data this week was somewhat better than expected with Initial Jobless Claims at 388K for the first time this low in a long time. Housing starts were also higher than expected. All good signs of a slightly better economy in the US with the emphasis on the word "slightly."

We have broken below that key support level of 1220 on the S&P 500 closing at 1216, but today we may go back above it.

Market comments for the week ahead: Germany in focus

The market ended the week down. Many did not want to go into the weekend holding stocks, because any news in Europe can quickly devastate stocks here. So caution is the rule, especially in September and October, the 2 most volatile months for the stock market. This morning's charts have a new discovery for me. I have the usual 200 day Moving Average lines drawn on the chart but also have included a 400 day Moving Average line, as well. As you can see from the 4 major Indexes below, it looks like the 400 day MA is the resistance line for the market and can give someone a better gauge as to whether to believe market moves or not. The last move up proves now to be a false Bear trap as anyone now knows after buying stocks when they appeared to be breaking above the downtrend line drawn in previous posts of a week ago. Here are today's charts.




This last chart below clearly shows that the last move up was a Bear trap for those unsuspecting traders. They would be wise to stay on the sidelines and watch rather than lose their money. This zig zag pattern downtrend will continue as there is no good news coming in the world as it pertains to their economies and this coming Wednesday all eyes will be not on the Republican debate but on Germany's vote as to whether they will be bailing out other countries. Watch this news as it will move our markets more than any other news.

Germany's Merkel is vulnerable to losing control. This analysis from Berlin:
"Merkel's coalition has a comfortable 20-seat majority in the lower house of parliament. But if she is hit with dissent in her own ranks, and is forced to rely on opposition parties to pass legislation to expand the single currency bloc's rescue mechanism -- the European Financial Stability Facility (EFSF) -- then her coalition could collapse, sparking early elections.

'The euro crisis entered a new phase over the past week,' influential German weekly Der Spiegel said on Sunday.

'Before the main question had been how the common currency could be saved. Now it is also about saving Merkel's chancellorship. If her coalition does not deliver a majority for the enhanced euro rescue mechanism in the autumn, people close to the chancellor say, the coalition is all but finished."

So this is what to watch on Wednesday. Good luck in the market next week and don't forget to watch President Obama's speech to Congress on Thursday evening on his Jobs program proposal.

Friday June 4th stock market commentary

The jobs numbers came out this morning. It's obvious that the government was responsible for job creation by hiring Census workers. Private sector jobs were up only 41,000 jobs. This was taken by the market very negatively. The Dow Futures before the report were at -60, but after the report they dropped to -200. I expect this to start the decline in the markets and to follow my predictive pattern I posted here in previous posts and repost today below, as well as what the market has done since this prediction.. This is going to be a bad day and Monday should follow through on today's drop.

You will notice from the chart above that the Eurozones Blue Chip Index looks bad and was pointing down even before the Jobs report, but the jobs report drove all of Europe's Indexes lower. Most are down about 2.5% currently.

I will add Updates on this same post during the day with comments and charts, so come back and see what has been added.

I am thrilled I am on the right side of this trade now by selling my TZA Puts yesterday and Buying the TZA Calls. Remember TZA is an ETF Ultra Short of the Russell 2000 index, symbol $RUT. So buy buying TZA Calls, the purchaser believes the Russell 2000 will be going down. TZA is a Triple short, meaning that for every 1% move down on the Russell 2000 Index, TZA moves 3% up. It is one of the most leveraged Option plays in my view.


Update: 7:00am PST
With 1/2 hour into the trading day, the Dow dropped down as expected about 205 points, but has recovered only about 25 points off the bottom. I haven't posted the Intraday chart yet, but it looks like a "w" pattern was formed and is slanted down. So I believe we will take out the current lows of the day and go lower.

Update: 9:40am
As the Intraday chart above shows we did go lower this morning. But if you look at the red line I have drawn, it points to even lower levels between now and closing. In view of this I purchased more TZA Calls for October for $1.50/share with a Strike Price of $9.00



Update: 11:00am PST
OK, here is the proof in the chart above that we did go lower. I do not know how low we are going today but several things are noteworthy. First, the volume is high today for this time at 120 Million shares traded on the Dow. Also, the Put to Call ratio has moved from 0.60 in the first 1/2 hour of trading to 0.91 this hour.

Update: 12:40pm PST
There's 20 minutes to go before the market closes. The key today will be if the Dow closes at the lows. If it does, it may mean a reversal of the market next Monday or Tuesday. If it doesn't, we have more downward momentum to go. Stay tuned as we are down 346 points!