1,825 or bust!
That's the deal today as we wait for the Fed minutes at 2pm. We already had the Fed statement back on December 17th, when the Fed announced a very light version of tapering along with a promise to keep rates near zero for at least another year.
That sent the Dow flying from 15,750 back to 16,500 (4.5%) and a 750-point run gives us the expectation of a 150 point retrace (20% – weak) to 16,350 or a 300-point retrace (40% – strong) back to 16,200 and, so far, 16,350 has held and that's a bullish sign for the Dow.
BUT, it's held on ridiculously low volume (see Dave Fry's chart) so it don't mean a thing until we see a proper test and it's hard to imagine what the Fed can say that would be worth adding to the 5% pop that's already been baked into these minutes – so I made the call to short the Dow Futures at 16,450 (/YM) this morning in our Member Chat Room.
During yesterday's Member Chat, we caught a nice move on the Russell. Aside from our usual Futures short (/TF) we looked at the option combo of buying the Jan $17 calls for .52 and selling the Jan $17 puts for .47 for a net entry of 0.05. That was at 11am and, by the time we were doing our weekly Webinar, at 2pm, that combo was at 0.25, up 400% in two hours. This is why we don't mind being mainly in CASH – you can make a Hell of a lot of money in this market by just deploying small amounts of your sidelined capital.
Also, keep in mind that CASH has gained 1.5% since we went to it over the holidays – that's something investors often lose sight of – cash is also an asset class that, sometimes, we want to get into when it's cheap. We had a situation where stocks were expensive-looking and cash was cheap, so we traded our stocks for cash – a very simple plan.
Brokers don't like you to be in cash because cash is the…
