As we tried to point out going into Thursdays trade following the rude reversal.....Don't sweat it, don't fret!. We were quite content with the early action as their was no downtick follow through and instead a slow uptick. But that all turned as oil was showing volatility and we got a big uptick!. Why?.. oil traded close to record highs over126 early on, before sliding below $121 and boosting the indices. It's been quite simple as the belief is if we get falling oil, it will spark the indices as they play around breakout levels. This is the oil pill the market wants, we're not relying on it or believe a substantial drop in oil will occur as the weather warms up. Therefore, we were more impressed with the fact oil climbed back to 124 and the market continued its drive to break over Wednesday highs confirming our belief for the time being that oil does not need to be the driving force to go higher. The NASD, SPX, $CRX and the still trailing DJIA that will confirm a nice break all gained steam as shorties covered at technical levels. We've been alluding to the perfect storm, to us its $CRX and the indices breaking out at the same time. Of course , we want volume, we got it in the commods', but know that will be hard to find elsewhere. Oh wait, its option expiration!. There's the volume as artificial as it might be, it will still counts. We hope with further short covering happening as soon as we toy with breakout levels and the fact we're heading into a weekend will fuel even more of it to make the charts pretty with a volume bar!
If you still wonder why we bring up the $CRX so much, all you have to do is see yesterdays action as it leads our DJIM plays. A precursor to action spreading in our plays. Anyways, how do you cool off the commodity action these days? You chase them higher with volume! No, this logic doesn't make sense but it is what's happening out there. We call it euphoric action. This is the kind of action where you get seemingly unlimited amount of bids in sizes and stock just keep on racing higher in the incredible amount of short time. The average volume for this euphoric action period is way higher than the normal period and its no coincidence the $CRX is breaking out. What it does to you is that it puts pressure on a trader to become a day flipper. When action from some of the coal, , shipper, solar, or steel names get into such a wild and hot fashion, we basically take it one day if not one hour at a time. We already know, we'll be buying pullbacks all summer in these plays, but for the time being thats the way it is as there is a different big gainer(s) every day. Yes, it seems you can get some insane percentage return just by sticking to a few hot plays, you have to remember that this is all going back to the same "commodity theme" we've been preaching all year.
Once again, our watchlist is filled with green lights today and it continues to almost feel to"too easy" these days. That's what happens in a giddy market looking for the next stage. We were a little bit cautious yesterday and we continue to be cautious today in spite the great performance of many of our favourites. Remember, euphoric action usually does not last long and we find that it's better to trade intraday opportunities rather than holding onto big positions and hoping for big gains on daily basis at this point. We're only cautious as to loading up positions and thinking we can relax this summer and just let stuff ride. We're not cautious to trade.
Option expiry day is here and we are looking for some more tradable intraday opportunities today until the day we get a confirmed move to the next stage as we turn these levels into support, not resistance. Come on DJIA catch up!