Will We Hold It Wednesday – S&P 2,100 Edition (again)

Now this is getting interesting.  

As you can see from Dave Fry's S&P chart, we are really close to failing the bottom of that wedge we've been testing since March and the 5th time may be a charm – as that's how many times we've tested 2,100 in the last 30 days.  

Of course, technically, we failed it at yesterday's close but one day does not a trend make, so we'll watch and see if the bulls have any gas left in the tank.  It goes without saying that we're getting a lift pre-market – that's just the way things are supposed to be, right?  We don't like to call it manipulation, just "early enthusiasm" that sets the prices higher before the bell rings and the Retail Customers are allowed to play.  

On the Dow, 17,750 is the line to watch and that's been tested almost every single week since March began.  Not yet this week but it's only Wednesday, which makes shorting the Dow Futures (/YM) at the 18,100 line a very interesting play this morning.  

If you're not a Futures trader, you can pick up the Dow Jones ETF (DIA) June $177 puts for $2, they have a delta of 0.32 so they pick up 32 cents for each 100 points the Dow drops, which means a trip back to 17,750 would net you almost $1.50 in profit (75%) – not bad for a quick hedge.  If the Dow heads over the line – especially if Nasdaq goes back over 5,000, you can kill the trade for a smallish loss (0.32 or less) which means we have a very favorable risk/reward profile on that trade – that's exactly what we like to see in a hedge.  

Last Wednesday, right in the morning post, we discussed shorting the S&P Futures at 2,105 (/ES) and the S&P bottomed out at 2,060 for a $1,750 per contract gain.  We're at that spot again this morning and our Members are shorting it again because – well because we LIKE making money so we're not ashamed to make it doing the same thing over and over again.  

We also talked about what a total scam oil trading was last Wednesday and, as predicted, oil crashed after the inventory report.  Today, oil flew back to $61.50 this morning and that is still our shorting spot for the oil Futures (/CL) – again, boring but it works.  Last week we actually went long at $61.50 ahead of the report and shorted at $62 but today I don't think $61.50 breaks (but we're off if it does until 10:30).  Same reasons as last week…

Last Wednesday I also told you we were going long on Coffee, using the Coffee ETF (JO), which opened the day at $22.25.  It closed yesterday at $23.38, up a quick 5% in 5 days but, of course, we use options to leverage that to a much better return.  

All the bounce levels we were watching last week remain in play.  We are still testing the strong bounce lines and we need to see 3 of the 5 holding before we even consider leaning a bit more bullish:

• Dow 17,950 (weak) and 18,000 (strong)
• S&P 2,096 (weak) and 2,102 (strong) 
• Nasdaq 4,975 (weak) and 5,000 (strong) 
• NYSE 11,080 (weak) and 11,110 (strong) 
• Russell 1,220 (weak) and 1,225 (strong)

Last week I said, if ANY of the indexes fail their 50-day moving average before the Russell retakes 1,247, that's going to be a clear signal of a very bearish turn in the indexes.  The Dow, S&P and Nasdaq all failed last week and the NYSE fell to exactly it's line at 11,015.  Failing the strong bounce lines today will be another bearish nail in the coffin but, as you can see by our bets – we're already leaning that way.  

Last Wednesday we showed you the NYMEX contract spreads from June to Jan and, at the time, there were 383,780 open contracts for June and I told you that those orders were fake, Fake, FAKE and would be almost all cancelled by May 20th (the close of contracts).  Already, this week, they have dropped the open orders to 210,617, but those FAKE orders didn't disappear – they have all moved to equally fake orders in other months:

While June lost 173,163 contracts (34K/day, which is important), July gained 129,294 FAKE orders and Aug gained 24,433 FAKE orders, accounting for 89% of the "closed" June contracts.  This goes on every month and no matter how many times we point it out to Congresspeople, they ignore it so we just give up and have fun with the betting.  

By next week, at least 80% of those remaining 210,617 FAKE June orders will be rolled along to fake the next month – all in order to create a false sense of demand to drive up the prices you pay for energy – sucker!  That's right, you are a sucker.  You are a sucker because you don't get mad about this, you don't take action and you keep electing people who are in the pockets of the oil companies and let this happen.  

We hate the system but we know how to make huge money betting on this ridiculous con game so we really don't care anymore.  I do my social service by telling you what's going on and you can do your part by working to change this Corporate Kleptocracy we're trapped in – if you are so inclined – or you can join us and make some money off the manipulators.  

Your call.