NEWSLETTERS & RECOMMENDATIONS - October 31, 2010

Dear Friends and Fellow Traders,

This week will at least clear up some of the uncertainties over hanging the market these last few weeks but may lead to a new period of heightened volatility in terms of potential market setting events. Furthermore, we have a ton of economic numbers out this week starting with Monday’s ISM Manufacturing, Wednesday’s ADP payroll followed by Friday’s Jobs Numbers. These last 2-3 weeks we were just marking time.

The good news, even if it's just buying the rumor and selling the news, is that any decline should be contained over 1100. September was the best month in 75 years while October was for the last 7 years. Past markets tell us when both September and October are this bodes well for a good year end rally.

The market is ripe for a trade able move in either direction over the short term. The bears tell us all the good news is in the market yet buyers are still lurking below current levels. Even a stronger USD should not derail the market very much.

The Fed’s “QE2” won't help create jobs and it just might create some further asset bubbles but it will help most everything at the margin. I've never known too much liquidity is a bad thing for assets or markets.

BTIM (BTX) Update
Reminder - Biotime switches symbols Monday to BTX. All I know is the more I read the greater my confidence grows that BTX is the real deal and the stock should be much higher next year. I'm personally looking at sales and profits for the first time in the company's history, more Pharma deals and, with any luck, a brokerage sponsor and their recommendation. Go BTX!

Trade of the Week in Review:
These last few weeks have taught us just how lucky we have been trading Expo Week options. Even when the market pauses there are great profit making opportunities with options using E-mini hedging in these narrow ranges. Thursday, I noted on the 12:00 A chart a call option trade with the 535Ws at $1.25 scale-in lower. I further noted you must hedge. By 12:30 the calls were trading at $0.95. The 2 or more hedging opportunities more than paid for the calls and late in the day you could have sold your free or parlayed calls as high as $1.95. That’s 3X return in hours! NET Weekly Chart 2010-10-29.

I pretty much tried the call trade recommendation with the 530s this time on Friday's A chart but the target price was too low. We never get mad if we can't own the calls at lows because we can buy the puts at highs and go long E-minis on the dips. Besides the puts were much cheaper and ITM.

So, on the Friday’s 2:00 B chart I recommended we buy the 530 puts in the 1183-84 area priced near $1.10 and scale in but must hedge. The market only retested the day’s high of 1182.50 so the puts only reached $1.20 which is close enough for government work. Had the market rallied to 1184 we would have been able to buy some additional puts near $0.75-.80. I covered discussed the trade rather well in the Chat room for any that went long. I was $1.10 scaling and missed the put trade.

I suggested a 100% long E-mini hedge position and started to scale-in at 1180.25 down to a full long position at the 60% Fib buy retracement in the 1178.50 level. I even suggested that some 30-40% of the puts could be sold into strength at that level over $2.00. The puts hit $2.30. About 25 minutes later the E-minis rallied to 1182.50 again. Scaling out into the sell zone netted about $150 per long put and more than paid for all the puts. At that point we can sell the remaining puts into weakness. The 530 puts closed near $2.00. A good NET trader tripled his/her money in less than 1 hour in a 4+ point range. Again, nice work if you can get it. The time span was too short to follow on with the 3-4 Alert Emails. I hardly had the time to get all this across in the Chat Room. Try the Chat Room – you’ll like it. See Friday's C chart.

Fasten your seat belt we're in for a wild ride.

For my customer’s who receive the newsletter early – Happy Halloween!

Keep those cards and letters coming. I still read them all.

Good Trading,

Stan Moore
702.267.0396