Terrific Tuesday – Dow Blasts Higher on Caterpillar, 3M Earnings

2 companies.  

That's all it took this morning to blast the Dow 130 points higher pre-market.  Caterpillar (CAT) was up $10 (7%) and that added 85 Dow points and 3M (MMM) jumped $8 (3.5%) and added 64 points so that's 149 of 130 points added by just 2 of the Dow's 30 components – the rest are net negative.  What a silly index!  The combined market cap of CAT and MMM is $200Bn, only as much as GE but if GE dropped 10%, that would only subtract about 20 Dow points, because GE is a $22.50 stock.

So a $22.50 stock worth $200Bn dropping 10% on the Dow has 1/7th the impact of 2 other stocks with the same TOTAL market cap rising an average of 5.75% between them.  That doesn't just not make sense – it's stupid!  Think how easy it is to manipulate an index that has those kind of price distortions.  

Fortunately, we love these easily manipulated distortions.  Yesterday morning, in our Live Member Chat Room, we shorted the Dow (/YM) Futures as they tested 23,300 and we got a great drop to 23,225 which was good for gains of $375 per contract. 

Even if you don't have access to the Member Chat Room, in our morning's PSW Report, we gave you the long trade idea for /KC at $1.28 and that was good for $375 per contract by 10 am (and today it's back and we can play it again).   

Our other Trade Idea from the Monday Morning Report was:

Silver (/SI) is back to $16.90 and that's down 0.40 from Thursday's close but back to where we went long on Wednesday so why wouldn't we play it again (with tight stops below) as it was a $1,500/contract winner last time?  $16.75 should be the low-low, so that's where I'd look to try again if $16.90 fails and we'll follow up on this one into Wednesday's Live Trading Webinar.  

As you can see, a
continue reading