NEWSLETTERS & RECOMMENDATIONS - November 13, 2011

Dear Friends & Fellow Traders,

October was the best, going-long, trading month in 25 years for the markets! It seems from reading a number of investment letters and reports I received most investors missed this rally. Traders are uncertain about uncertainty. The markets fall apart one day only to rally sharply the next. It's a traders dream but an investor’s nightmare.

Today bears are as loud as ever and increasingly confident. Why shouldn't they be? Doug Kass writes, "We've been in post-Lehman holding pattern for 3 years now." Europe can implode any day. We all know the bear case by now. Maybe they will be right down the road.

Today I believe the bear case is already be priced in the markets. Recent political and financial developments in Euroland may have already reduced the likelihood of a severe downdraft over there. Our economy is moving along reducing the threat of a double dip. China, the world's economic driver may be poised to grow again. Rates are coming down across the globe.

Right now I believe money is moving out of bonds and into equities and may accelerate next year if the GOP can get its act together and take its show on the road. PMs (portfolio managers) will be chasing performance into year’s end as most PMs are generally at maximum levels of defensiveness. So between now and yearend could prove more bullish than the bearish crowd believes.

Trades of the Week in Review
Primarily when it comes to trading for a living NET traders don't care whether the markets go up or down short term. Of course, over the longer term this time we much prefer an up market given our current open long positions in our favorite stocks.

Last week saw the market opened higher, declined some 50 S&P points only to rally back 40 points to end the week. Recently I noticed there was and interesting trading pattern developing the last 6-7 trading days. The markets mostly opened, traded lower but finished higher. Could this be PMs buying dips to create some performance and be playing catch up? Seems likely enough for me.

Tuesday morning after the market sold off I Alert Emailed to buy the 127 SPY calls under $0.80 with hedging as usual. The market rallied right to major resistance at the 1275 level or the 200 DMA. Calls could have been sold as high as $1.70. However, I was expecting good news from China after 8:00PM EST so I suggested we hold some calls overnight looking to hedge the "good news" similar to the "Buy the Rumor, Sell the News", a favorite NET trade. The news was as good, as was expected, but the markets didn't respond. So, it’s time to hedge one’s position. I then sold some E-minis short only to wake-up and find these contracts down over 30 points. I recommend taking profits.

That Wednesday morning before the markets opened I Alert Emailed and recommending taking the $1,500 profit per hedge and selling the calls which opened at $0.40. There were other smaller hedges during the day but you get the picture. We lost $400 per 10 calls but earned over $4,000 by hedging just 2 E-minis! Traders could have sold as many as 4 E-minis short for an $8,000 profit. Great work if you can get it. The market sold-off even harder some 20 more points, later in the day. We left a lot of money on the table that day.

The next morning the market gapped over 20 points higher on the opening I Alert Emailed to buy puts near the opening per trading rules taken right from the Trading Bible. The 125 SPY puts hit $1.08. Less than 90 minutes later the S&P price retested the previous day's low and most profits could have been taken near $2.36. Both option trades doubled over a short time frame but there was some great hedged profits taken as well. See Friday's "D" chart, NET Weekly Money Chart 2011-11-11.

I thought of recommending a call trade Thursday which tripled by early Friday morning but then hedged my remaining puts instead. At least you see the trading potential offered every week to earn a good living. I'm not perfect just good enough and earn a few dollars nearly every week.

Good trading,

Stan Moore
702.558.1814