Clinging to the 50-Day

Dow and S&P Holding On Tight

By Bryan Bottarelli
Wednesday, April 01, 2009 10:37 AM EDT
Wed, 1 Apr 2009 14:37:00 GMT

Dear Bottarelli Research Member,

Good morning. Bloomberg is reporting today that the U.S. government and the Federal Reserve have spent, lent, or committed $12.8 trillion — an amount that’s getting very close to the value of everything produced in the entire United States last year.

These numbers are getting truly staggering. After all, if you spent a million dollars a day, every single day since Jesus was born, you would still be several hundred billion dollars short of having spent one trillion. And remember, as of this morning, we’re talking $12 trillion.

At the same time, our world leaders are meeting at the G-20 summit in London, and I just can’t imagine that any sort of cohesive action plan will come out of this meeting. As a result, we continue to experience these choppy and seemingly incoherent trading patterns. As you can see from the Dow chart below, the Blue Chips are still clinging to their 50-day moving average.

INDU

A very similar pattern is occurring on the S&P 500 as well. See below:

SPX

Since we still don’t know if the next move will be a break-down or a break-out, I prefer to maintain our current positions. I like the fact that DO is finding support at its 50-day moving average, which should help our DO April 65 Calls (DO DM) shoot back into the black. Hold.

DO

In terms of our downside plays, our MTB April 45 Puts (MTB PI) could really move higher if the markets pull back. And while I acknowledge that some of our AET April 25 Puts (AET PE) triggered at our stop prices, AET quickly gave up its gains going into the close of trading. The AET chart continues to look capped off at the $25.00 level, so I’ll continue to follow this position for everyone who’s still in.

AET

And finally, I still like the idea of holding the UGL April 33 Calls (UGL DG), as another round of market fear could kick-start gold prices. And as you know, when gold starts to move, the upside is rather powerful.

UGL

As always, if anything else comes up during the trading session, you’ll be the first to know. But until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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