Futures were steady throughout the night and into the open this morning following Monday’s pullback and were showing a higher open. We were also hearing positive developments on the government shutdown leading us to believe some type of agreement could be in the works.
The market opened higher and the zombies spoke shortly afterwards. Needless to say, the market started pulling back following another game of political charades as no deal was reached.
The Head Zombie is scheduled to speak at 2pm (EST) and the latest news from this morning’s standoff was that the President told John Boehner that there would be negotiations over the debt limit (again) and that it needed to be raised to get the ball rolling. The war of words could get worse when Obama speaks so today’s close will be crucial in determining if there will be a full scale selloff on Wall Street or if current levels hold.
The Head Zombie has said he wants Wall Street to worry and privately it has been said he is hoping for a correction so that it would put more pressure back on Boehner. Maybe Obama throws the bulls and Boehner a bone. The fact that there is rhetoric between the two is a positive but we aren’t holding our breath for a handshake.
Today’s pullback is bittersweet because it has knocked us out of quite a few trades for both our Daily and Weekly Wrap portfolios. Some of the momentum stocks we have been riding have pulled back but we have been closing quarter and half positions over the past few weeks and we set limit stops to protect the rest of our profits.
We have planned for the current trading range and a possible pullback so we aren’t disappointed because there could be an opportunity to make money on the short side. Remember, we could care less where the market is headed because we play the trend. We have outlined downside targets to go short and with today’s pullback we are almost there as last week’s lows are being tested. However, there is a chance for a whipsaw rally if the President decides to be a leader instead of a bully.
As we head to press, the Dow is down 104 points to 14,831 while the S&P is lower by 16 points to 1,660. The Nasdaq is declining 66 points to 3,704 and the Russell 2000 is off by 15 points to 1,050. The S&P 500 Volatility Index ($VIX, 20.38, up 0.97) is up 5% and has triggered 20.
At current levels, all of the indexes and the VIX are right at our downside targets we covered in our chart work from the weekend. Our homework has been amazing all year long and we continue to say this is a great time to be investing in options. We do have a few short positions from August and September that could do well if there is a break below major support so we do have some protection if the bears stay hungry. Even better, with today’s Profit Alerts, we have fresh cash to deploy to take new trades!
Subscribers, check the Members Area for the updates and Profit Alerts. For our Weekly Wrap subscribers, we will have an update out shortly on additional Profit Alerts.
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