Will We Hold It Wednesday – Dow 17,500 Edition

We're stuck in the middle of the range now:


As you can see from Dave Fry's Dow chart, we've been gyrating between 17,200 and 18,250 on the Dow for the entire year.  From a mid-point of 17,750(ish), that's just a 2.5% up or down move before getting pulled back towards the middle – other than the August flash crash which ripped us down to 16,000 – almost exactly 10% off the middle of the range.  

Range-bound markets can be frustrating to trade if you trade them wrong but it's perfect for our "Be the House" style since we keep SELLING premium to all the suckers who think the Dow will go up or down more than 2.5%.  We were fortunate to have been bearish into the August dip but, since then, we've simply played the range again – though erroring on the side of bearish caution given the macro environment.  

The market took another hit yesterday but not our featured trade on LNG, which opened in the red (giving us great entries on the spread we featured) but closing up 1% for the day – despite the massive market sell-off all around it.  UNG is gaining ground as well and those /NG Futures we discussed had a great day, popping 10 cents since yesterday's open (now $2.11) for a $1,000 per contract gain.  

Just a week ago, when we began giving out our FREE Christmas Trade Ideas, I said "The S&P gets to 2,100 and we short /ES Futures at 2,100 (with tight stops above the line) and Russell (/TF) Futures below the 1,200 line and Nikkei (/NKD) Futures below the 20,000 line and then, tomorrow or Friday, I'll tell you how much money we made shorting and you'll say "why do I never catch these great trade ideas" and I'll say it's because you're not patient enough to wait for the pattern to reset itself and just make the obvious play."  Just a week later we have:

  • S&P (/ES) 2,055 for a gain of $2,250 per contract 
  • Russell (/TF) 1,155 for a gain of $4,500 per contract  
  • Nikkei (/NKD) 19,300 for a gain of $3,500 per

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