Traders Catch Both SPX Trends With These Two Strategies

work with yesterday with the initial Trap Door short on the early up into the

1237.73 10:25 a.m. ET bar, which then reversed down to 1228.33 which set up a

1,2,3 HB (higher bottom) long entry which advanced into the 1237.81 close, +0.7%

on the day. There was a previous 1,2,3 entry above 1230.59 which only traded to

1232.43 before reversing down to 1228.33. This trade was essentially scratched

and the second entry, as mentioned above, was an excellent trade. The Dow was

+0.9% to 10,686, and the
(
QQQQ |
Quote |
Chart |
News |
PowerRating) +0.8% to 39.43. To highlight the knee-jerk

reactions to news and certain large hedge funds trying to game price, you just

+0.5%, except the RTH, -0.1%. The oversold
(
TLT |
Quote |
Chart |
News |
PowerRating) was +0.7%, in spite of

crude oil, +1.04% to 66.75, and the US Dollar ($US) down to 86.96. The gold

stocks are leading cash gold, which closed at 437.35, +0.6%, and will pick up

some legs above 440 on a breakout from a symmetrical triangle (daily chart). Our

focus gold stock, which is
(
NEM |
Quote |
Chart |
News |
PowerRating), closed at 41.35 above the 1,2,3 HB trend

daytraders, but frustrating for position traders. In fact, the SPX has really

gone nowhere over the last four weeks with 6 – 7 days having intraday highs

between 1240 – 1245.86 with the rest of them in the mid-1230s. This is what I

consider churning into the .618 retracement zone to 1553 (from the 769 2002 low)

positions have been sold. For example, the QQQQ bought in the 23 – 25 range was

jettisoned and replaced with the Dec 05 39 calls at $1.50 when the QQQQ was

trading at about 38.40. That established a defined-risk position with maximum

risk being the additional $1.50 cost of the call. This was just rolled up to the

Dec 05 40 calls bought at $1.50 vs. the sale of the 39 calls at $2.05. That

makes the net cost of the 40 calls just .95. If the market goes into a full bear

cycle, the worst case is a 37.48 out (vs. the original 23 – 25 cost) which is

the initial 38.43 sale, less the .95 cost of the 40 call. If the market

accelerates, then all upside gains are captured above 40.95. Net net, the bull

market gains are taken off the table, and if the market crashes into the August

– October period, you could care less. If the major indices go sideways into the

December expiration at current prices and the 40 call expires worthless, another

decision would have to be made if you wanted to have long exposure in the market

at that point. Now I can sit back and enjoy all of the ridiculous market

commentary that will be coming on whether the bull is over and the bear is