Strange Moves

Maintain All Positions

By Bryan Bottarelli
Wednesday, September 24, 2008 10:22 AM EDT
Wed, 24 Sep 2008 14:22:00 GMT

Dear Bottarelli Research Member,

After the first 50 minutes of trading, we’re seeing some very strange moves within the powerful ultra-short positions that we’ve been playing lately. For example, sharp down-moves in the Ultra Short Dow 30 ProShares (DXD – AMEX), Ultra Short S&P 500 Pro Shares (SDS – AMEX), and Ultra Short Oil & Gas Pro Shares (DUG – AMEX) would lead you to believe that the major markets are engaged in a big-time rally. But as you know, that’s certainly not the case.

In fact, a powerful up-move in the pre-market futures (driven by the $5 billion investing news in GS from Warren Buffett) has now been completely erased. In situations like this, I would expect to see the SDS, DXD, and DUG trading higher on the day. But as I write, all three are trading lower by more than $2.00. If I were to speculate, this could be a result of the short-selling ban, but I have no proof to support that statement. It certainly is a strange move, which supports the idea that we must remain fast and nimble in this market environment. If DUG finds support at the 200-day moving average, we could play another round of calls. But for now, let’s continue to monitor the situation.

DUG

Our current positions are all plodding along today — meaning that none of them are making a move significant enough to comment on. I would think that gold should be setting up for another upside push, and that would benefit your GLD October 87 Calls (GLD JI) and your DBA November 33 Calls (DBA KG). Maintain both positions, along with your KMB October 65 Calls (KMB JM) and your TSO October 20 Calls (TSO JD). And as always…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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