Now this is getting interesting.
As you can see from Dave Fry’s S&P chart, we are really close to failing the bottom of that wedge we’ve been testing since March and the 5th time may be a charm – as that’s how many times we’ve tested 2,100 in the last 30 days.
Of course, technically, we failed it at yesterday’s close but one day does not a trend make, so we’ll watch and see if the bulls have any gas left in the tank. It goes without saying that we’re getting a lift pre-market – that’s just the way things are supposed to be, right? We don’t like to call it manipulation, just “early enthusiasm” that sets the prices higher before the bell rings and the Retail Customers are allowed to play.
On the Dow, 17,750 is the line to watch and that’s been tested almost every single week since March began. Not yet this week but it’s only Wednesday, which makes shorting the Dow Futures (/YM) at the 18,100 line a very interesting play this morning.
If you’re not a Futures trader, you can pick up the Dow Jones ETF (DIA) June $177 puts for $2, they have a delta of 0.32 so they pick up 32 cents for each 100 points the Dow drops, which means a trip back to 17,750 would net you almost $1.50 in profit (75%) – not bad for a quick hedge. If the Dow heads over the line – especially if Nasdaq goes back over 5,000, you can kill the trade for a smallish loss (0.32 or less) which means we have a very favorable risk/reward profile on that trade – that’s exactly what we like to see in a hedge.
Last Wednesday, right in the morning post, we discussed shorting the S&P Futures at 2,105 (/ES) and the S&P bottomed out at 2,060 for a $1,750 per contract gain. We’re at that spot again this morning and our Members are shorting it again because – well because we LIKE making money so we’re not ashamed to make it doing the same thing over and over again.
