NEWSLETTERS & RECOMMENDATIONS - October 16, 2011

Fellow Friends and Traders,

The US stock market has withstood a massive dose of bad news to stay even this year while most other world markets are still down well over 10% for the year. The S&Ps are up some 150 points since the 10/3 lows. Ten weeks ago the S&P was near 1200, now it’s around 1220. There was a lot of trading excitement in between for NET traders.

Most traders are very skeptical of the latest rally given it came on very low volume with massive short covering and with minimal positive economic news. I see the glass as half full. The market quit pricing-in a Lehman-type disaster and a system meltdown. We will muddle through is my best guess.

I noted earlier in the Chat Room and on my Intraday Charts that if the jobs numbers were better than expected the rally could just be extended with good earnings. AAPL's record iPhone 4S pre-sales set a record. GOOG's blowout sales and EPS numbers gave the market further hope as well.

While most of the world is still focused on Europe the US economic data coming out was mildly surprising. Somehow a zero growth number for the 3rd quarter has morphed now to a 2% positive. Right now recession talk is off the table.

However, we're closer to the top of the trading range. To get much higher than 1230-50 will require really good economic news and fresh money and not just the absence of sellers and bad news. Furthermore, the G20 has three weeks to solve the Eurozone debt crisis. The countdown to the November 3 Cannes Summit begins this weekend. Don't expect any real news this weekend as the Eurozone ministers meet next weekend. I really see a long series of meetings and many member votes before anything meaningful happens. Just as long as a Lehman-type event is off the table and with TARP-like talks to bail out the European banks the world markets should continue to trade news event to news event and we love the volatility.

I've been looking for a massive asset allocation out of bonds and into equities to really pop the market over 1300 for awhile now. Rates have risen from 1.75% on the 10 year to 2.25% but the re-allocation hasn't happened yet. I'm guessing corporations are sitting on their hands waiting to see if the GOP can get their act together before opening the floor gates with a much better economic and regulatory outlook ahead. Patience ahead and trade!

Trade of the Week Review
As I promised last week here's a trading video of last week’s great hedging and parlaying trade dated 2011-10-07. Learn and enjoy the profit-making opportunity this video presents.

There was more of the same again this week so I won't spend a whole lot of time on the trade. Since we've been using the SPY weekly options I find the trading with these particular options give us a 5-day versus 2-day opportunity to make real money every week.

This 150-point rally over the last 9 days was a thing of beauty to watch. Check out a 30-minute chart to see the up sharply, sideways and up sharply again. We identified support, found a resistance level and bought puts to get long the E-mini hedge. The market obliged and rallied to resistance went sideways where we hedged our brains out to more than pay for the puts then as the market continued higher we rolled up to a higher put to continue the game or traded the E-minis.

Wednesday I alert emailed our subscribers to buy the 121 W puts and to hedge. We started buying under $1.00 and added to our holding into the low $0.60 area. Thursday I alert emailed to close the put trade out early. The 121 puts got as high as $2.05 making it possible to earn nearly a 3X return overnight plus substantial hedged profits! See the Thursday "A" Chart, NET Weekly Money Chart 2011-10-14.

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

Good trading,

Stan Moore
702 558.1814