This market seems to be spring loaded to close higher no matter what the opening brings…today was no different with the markets starting off to the downside only to see a reversal to finish the day slightly under 1330…perhaps it was the fact that Hosni Mubarak resigned or that the U.S. consumer sentiment data came in at its highest level in more than half a year coming in at 75.1 which was up from 74.2 in January.

As for commodities, Oil futures ended at their lowest levels in more than 10 weeks while Natural Gas also closed at its lowest since Nov 16 and this week saw it having its worst week since late August last year…the Dollar Index finished up to 78.51 while Gold pulled back to 1356.70…only the Agricultural products seem to follow the lead of the equities markets and continued higher into the weekend.

Except for Energy products, everything seems rosy; -To the Moon Alice, To the Moon we Go!!

Well, from my experience, and if you have been trading for any length of time yours as well, nothing is really as it seems…sure we’re in a strong bull market, contrary to what many of the indicators and professionals are saying…but as I have said many times before and will say it again for emphasis; I am playing very light here, keeping my stops tight while also keeping over 50% of my portfolio in cash…I still have bullish bets in play (never fight the trend as the markets have more patience than you have capital!) but, like a frightened animal at the opening of hunting season, I don’t hang around long if things don’t look right in my individual positions.

If you look at a weekly chart of the VIX below you can see we’re still flirting with that same support zone where, in the past, we’ve seen fast and severe spikes upward…I believe we’re going to see that again, maybe not during earnings week (we’re wrapping that up in a week or so) but maybe shortly thereafter…I’ve purchased some VIX puts as part of my hedge and with volatility so low, option premiums are also low (meaning cheap!)…for those that are fully loaded in the markets, make sure your hedged properly or you may find yourselves on the short end of a very mean bear!…

As a reminder, so far so good for our Monthly session next Saturday, Feb 19th…I may not be able to go the full 3 1/2 hours but will try to do my best…I will send out some meeting reminders next week but if you are local to CT I hope to see you there…

Trade Smart — Not Often

hpb