Pre-Market Alert: A Critical Test

Enter the “Working Group?”

By Bryan Bottarelli
Monday, April 14, 2008 8:59 AM EDT
Mon, 14 Apr 2008 12:59:00 GMT

Dear Bottarelli Research Member,

While catching up on some reading over the weekend, it struck me that every column, editorial, and opinion piece I read was once again bearish. Not a single article offered a “glass half full” opinion, and this excessive bearishness could lead to some volatile price swings early in the week.

Now, as a quick pre-market alert, it’s important to note that all three of the major market averages are flirting with their critical 50-day moving averages. After Friday’s 256-point Dow loss, a breakdown below these levels could very well signal a re-test of the March lows of 11,750 (500 point below current levels). And if this happens, then a breakdown below these March lows could confirm a bear market.

INDU

Considering all the negativity out there, it appears like most market observers expect at least some of this downside movement occur. But before jumping onto the bearish bandwagon, remember that the good old boys at the President’s “working group” (also known as the Plunge Protection Team) had all weekend to realize that the Dow, NASDAQ, and S&P 500 are all at extremely critical technical levels. Based upon their recent actions, I would guess that some level of market support gets executed by the “working group” if the threat of a market breakdown occurs. Therefore, let’s maintain our current positions on the SPWR May 100 Calls (QSU ET), LEAP May 50 Puts (UAO QJ), and CHK May 47.5 Calls (CHK ES) and use any market volatility to pick off a quick winner. When it’s time to act on any of these positions, you’ll be the first to know. Until then, get prepared for the market open — and as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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