Dear Traders and Fellow Friends,

The higher the market goes the more defensive I want to get. At the same time it's hard to get very bearish. Most investor classes have massively de-risked. Today's dominant investor classes -- individual investors, hedge funds and pension funds -- have de-risked and are relatively uncommitted to equities. The same applies to almost all foreign money managers as well.

A re-allocation into stocks (out of bonds) represents an underappreciated and potentially massive (and latent) demand that could easily be the catalyst for a move to all-time highs in the S&P 500 in 2012 witness the job's number stock rally on Friday and the sharp selloff in bonds. However, I believe this year will deliver just enough economic and corporate profit growth to satisfy risk assets (U.S. stocks) but not too much to alter policy from a market-friendly Federal Reserve. Therefore, continue to trade your brains out.

Trades of the Week in Review
Thursday morning I sent an Alert Email to SPY buy puts near 1326 and calls near 1316. As a result NET traders bought the 133 puts near $0.50. The S&P rallied near 1326. After a few hours these puts traded near $1.00. There were a few good hedges thrown in. Then near 1:00 Thursday the S&Ps fell to the 1317 level. Here I noted on the charts that the 133 calls were a great spec trade between $0.20 and $0.30.Here too were a few good hedges as well.

As usual I noted on the final charts to hold all options overnight for hedging opportunities given the unusually wide range outlook for Friday's jobs numbers. We'd buy S&P dips if long puts and short any S&P rallies into a good number Friday morning before markets opened to lock in our long call profits.

The jobs numbers were exceptionally good when reported 8:30 Friday morning. The overnight low for the S&P was 1320. At this level put buyers could have gone long a few E-minis. The call buyers stood pat waiting since all their options were fully paid for. Within minutes of the report the S&P was breaking out through the 1332-5 resistance and up over 16 points from the low. That's nearly an $800 profit potential per E-mini long hedgers. 10 puts cost only $500 and were already more than paid for.

I Alert Emailed right after the release for all call buyers to sell E-minis to lock in their gains. At the breakout levels the calls would trade between $1.10-1.30 for a 4-6X return! The market opened sharply higher then fell back giving the calls holders a chance to cover their shorts profitably.

After 10:00 I Alert Emailed the calls were trading at $1.39 and suggested scaling out. I believe the calls traded near $1.70 later Friday. That's anywhere from a 4 to 8X return depending where one bought the calls! See Friday’s "A" Chart, NET Weekly Money Chart 2012-02-03.

I want you to note all the best trading comes in the overnight sessions now. Trading cheap expo options for multi day swing trades is the way to go, especially when trading in front of market moving news events.

I will be moving residences early next week. There will be no charts for at least the first 3 days. The Chat Room will be open Mon, Tues and Wed but I will not be in. With luck and an Internet I could be up and running Thursday.

Good trading,

Stan Moore
702.558-1814