What a wild day on the market! The Dow dropped 700 points in a matter of 15 minutes before coming back 600 points from the day’s low to close. Take a look at this chart:
This is an intraday chart on the Dow for today. At about 2:30pm ET, the Dow was at around 10630. 15 minutes later, at about 2:45pm, the Dow plunged under 9900!! Then, it did a sharp reversal to close above 10,520. The media is going crazy with stories about a trading glitch. But, even before the sharp fall happened, the market was sliding with increasing momentum. If we take out the sharp swing and the noises thereafter, the curve is actually very smooth. Take a look at this chart:
See the red curve that I drew from just before the sharp drop to the close? See how smooth it is?
Now, why am I showing this? What am I trying to demonstrate? What I am showing is that whether there was a trading glitch or not, this move today, where the market closed, was real! For the past 2 weeks, I have been saying in my blogs that I think a good theme right now is "long gold and short the market". There were simply just too many uncertainties. On Tuesday, I outlined those problems again, namely "problems in Europe, lawsuits against GS, financial reform, oil spill…etc," not to mention the rising dollar (pressure on commodity sectors) and the Austrailian tax on mining.
We were properly positioned to capture gains on the market’s move today. We locked in profits on both sides of the trades with puts on market leaders and calls on gold. Here are the closed trades for the day:
May 06, 2010
11:54 | HappyTrading GS ($140.25) Sold to Close 05P140 May 140 puts, at $6.00 +8%
11:50 | HappyTrading GS ($140.25) Sold to Close 05P140 May 140 puts, at $6.25 +14%
11:48 | HappyTrading NFLX ($90.00) Sold to Close 05P95 May 95 puts, at $7.00 +100%
11:32 | HappyTrading GLD ($116.60) Sold to Close 05C113 May 113 calls, at $4.55 +133%
09:14 | HappyTrading MA ($234.00) Sold to Close 05P230 May 230 puts, at $5.30 +51%
08:29 | HappyTrading GLD ($116.20) Sold to Close 05C113 May 113 calls, at $4.00 +105%
08:10 | HappyTrading EOG ($101.00) Sold to Close 05C110 May 110 puts, at $9.70 +98%
08:00 | HappyTrading EOG ($101.55) Sold to Close 05P110 May 110 puts, at $9.10 +86%
06:51 | HappyTrading MA ($235.30) Sold to Close 05P230 May 230 puts, at $5.00 +43%
In our Trading Room, our members were certainly having a good time. One member in particular had the best trading day of his/her life, making $45,000 in one day!
pitmlp May 6, 2010 1:02 PM
Best trading day of my life. 45k profit on 450k asset base. Fun. Thanks all.
Happy, some of your posts kept me short. Always have lowball orders in -
that much I learned today.
Here are some other comments from our members in the Trading Room:
angar May 6, 2010 12:18 PM
WOW… Congrats Happy !! Today’s trading history is AMAZING.. NFLX trade was one of the best !!
happydad May 6, 2010 12:19 PM
I’ve been a bear at heart this whole run up so today is a bit bittersweet for me.
Just glad I’m part of this room because for a while I was second guessing my own views.
The key is to not be stubborn and make money both ways!!!
rocketbottle May 6, 2010 12:21 PM
Happy, brilliant trades.
G Gan May 6, 2010 12:43 PM
Happy
congrats (very very nice trade) and this site sure make people " happy"
Frosty Muggs May 6, 2010 12:25 PM
happydad, that’s the greatest thing about this board. I can get confirmation for what I already
know to be true (or have billbigd put some sense into me LOL). It keeps me centered and keeps me
from second guessing myself.
This is no surprise to us. I challenge everyone to go back and read the comments here for the
last few days. We all knew it was coming.
Here are some big movers today. BIDU: day high $694.59, day low $625. I commented on BIDU today:
May 6, 2010 8:32 AM
BIDU
the thing about BIDU right now is that it splits 10:1 next week. so, instead of $677, we can look at it as $67. in a weak market, in can easily go down to $60!!
Now, although it was unusual, it one sharp drop, BIDU fell to $625, which would be $62.5 after the split. Not that far from $60 right? BIDU closed back up at $668.02 today. So, perhaps it is still a trade to watch, if you missed it. PCLN: day high $248, day low $202.69, close $233.10. ISRG: day high $349.65, day low $314.15, close $337.29. These should all be interesting plays in the next couple of weeks.
The Dow closed down 347.80 points; SPX dropped 37.75 points; Nasdaq tumbled 82.65 points:
SOXX (semiconductors) led the techs with a 3.29% loss. USO (oil) fell 3.52% while OIH (oil services) lost 3.68%. XLF (financials) slumped 4.22% and HGX (housing) dropped 4.44%. GLD (gold) jumed almost +3%. GDX (gold miners) added +1.42%. FXI (Chinese ADRs) was down 3.35%.
SPX
SPX dropped 37.75 points to close at 1128.15. It closed below 1130. The MACD curved down.
Nasdaq
Nasdaq tumbled 82.65 points to close at 2319.64. Its daily MAs and MACD curved lower.
Major market indices all lost more than 3% today. What’s disturbing is that even when the market bounced back today, SPX could not close above 1130! So, I would not discount the fall today. The market is trying to tell us something. Tomorrow, we’ll get the latest jobs data, which could bring the market some bounces if the data are strong. But, the momentum is still on the downside. The SPX 1150 level should become a resistance now, and it could be tested tomorrow if the jobs report is strong. If the jobs report comes in weak, the market may test SPX 1100 again! After locking profits today, we don’t have many positions open and are mostly in cash. We’ll wait and see how the jobs report comes in tomorrow morning.
Good night and HappyTrading! ™ 
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