Friday Fade Out – A Wild Week Comes to a Close

We're still well-hedged in all 5 of our Member Portfolios with strong cash balances for additional protection.

What a week it has been.

For the 3rd time in a month we have tested the highs of the Dow only this time we also tested lows that go back to early July, when we ran up from a test of 24,000.  To some extent, we would call this a bullish test of the 50-day moving average at 25,000 (this is an hourly chart, so those are the hourly moving averages) but we also bounced off that in May and went back to 25,400 before falling back to 24,000.

Needless to say, we're still well-hedged in all 5 of our Member Portfolios with strong cash balances for additional protection.  We did use some of that cash to add positions we thought were a bit too low – but they only replaced some too high positions we cashed out during July's expiration week.

Keep in mind, the market has actually gone NOWHERE since the February high of 26,600 and we're still a good 1,000 points below that so perhaps people who say I'm too bearish during this "amazing" bull market need to get a bit of perspective.  I'm not bearish – we have 50 long positions in our Long-Term Portfolios – I'm just CAUTIOUS because cautious traders live to trade another day, and I like trading! 

Even if it's a rising channel, the market is still in a channel and we've been beating the Dow and the S&P and even the Nasdaw all year long by not going crazy at the top of the channel and not panicking at the bottom of the channel.  Just yesterday, at 3:02 pm, I said to our Members:

/YM 25,600 is a very tempting short after this madness.  If I weren't on a ship, I think I'd play it with tight stops above.

That trade idea isn't rocket science, we're just thinking that a 600-point run from 25,000 (which is just under the 2.5% line at 25,625)should give us a small retrace.  In fact, using the 25,625 line predicted by our 5% Rule™, we expect a retrace of 125, back to 25,500 (weak) or another 125, down to 25,375.  So all we're doing is playing the channel and betting on what is most statistically likely to happen.  In other words, we're BEING the House – NOT the Gambler!

Today is options expiration day and we'll see how things hold up but it's next week that will tell the tale as to whether we are topping out again or finally consolidating for a move even higher.  Congratulations to those of you who followed our trade ideas from yesterday's Morning Report (just $3/day on an annual Membership) like Silver (/SI) long at $14.40, which, as you can see, had a very nice outcome with $15,000 gained on 10 contracts during the session.  

Aside from the Nasdaq longs, we also mentioned /RBV8 (Gasoline), which is still playable at $1.875 – that's a fun one into the weekend and oil is already up 1% this morning.  See, we only ask you to pay for a year what you can easily make in a day using just one of the hundreds of Trade Ideas you'll see reading the PSW Report – it's a good deal! 

Have a great weekend,

  • Phil
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