Drifting 200 Points Lower

But Still Not Panicking

By Bryan Bottarelli
Wednesday, May 07, 2008 3:33 PM EDT
Wed, 7 May 2008 19:33:00 GMT

Dear Bottarelli Research Member,

Today’s market action illustrates why I’ve remained on the sidelines today. As you can see below, today’s downside move has taken the Dow back down to yesterday’s low, which still maintains the trajectory of the upside trend that began with the double-bottom formation in March. In other words, initiating any new downside put trades (even if they were placed this morning) still appears to be a risky bet — as a snap-back move to the upside could realistically occur at anytime. After all, I’m not sensing that today’s 200-point sell-off has sparked any sense of panic in the markets, and this could lead to bargain-hunting buying going into tomorrow and Friday.

INDU

Therefore, I’d like to remain on the sidelines for today — and possibly into the open tomorrow. Lower prices at the open tomorrow could offer a series of new call playing opportunities, but let’s wait and see how today’s close effects tomorrow’s open. If bargain-hunting buying begins to occur, we’ll have any number of strong new play opportunities. And if not, we’ll probably see a rush to safe-havens like gold, which should benefit our ABX June 42.5 Calls (ABX FV). Either way, we’ll continue to trade in the most appropriate manner — whether that means adding “calls on the dips” or “puts on the rips.” But for now, the best tactical position is to maintain a light trading ledger. Better opportunities will come at a later date. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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