The market seems to have stabilized and so far our remaining Feb bull put spreads are safe.  This is our last week for our Feb spreads and we'll notify you through email if we need to take any type of action.  If not, we're going to hold our spreads and let them expire worthless for the buyers, where they will be 100% profitable for us, the seller.

We're almost through Q409 earnings season and about 80% of the companies that have reported have beat estimates, which is good news.  Below are some of the more closely watched companies that report this week. 

Tues the 16th - Whole Foods
Wed the 17th - Owens Corning, PF Changs, Analog Devices, Applied Materials, Hewlett Packard, Nvidia
Thur the 18th -  Wal-Mart, Dell, Intuit
Fri the 19th -  JC Penney

If you are auto-trading, you don't need to do anything other than make sure that the reserve cash is in your auto-trade account.  The auto-trade accounts have currently allocated 80% of the cash and we rolled the SPY Feb 103/105 bull put spread into March.  You should have 3 Feb spreads and 1 Mar spread in your account.

Per our existing Feb spreads, we recommend the following possible actions if the market pulls-back this week. For each recommended adjustment below, it's highly advisable to "pre build" your 4 legged roll orders and save them so if you need to roll a spread you will be able to roll it quickly.  As a reminder, when we recommend to roll a spread, in order to keep all of your maintenance "whole and in play", you will need to execute the roll in a single, 4 legged trade where you are closing out the existing spread and opening a new spread in a single order.  For more on how to do a 4 legged order please go to the Members Only Learning Center and read the 2 entries on making adjustments and rolling credit spreads.  In general, we are recommending to roll into March since the US economy is gradually recovering and the stock market will probably continue to trend upward, albeit gradually, after this correction runs its course.  If you don't believe that the economy is improving and that the stock market will continue to go down over the next few months, you then might consider rolling your spreads down into the same month, so you'll make a clean break out of February.  If you do this, however, your loss will be higher, but you will be making a clean break from February.  If/when you place a 4 legged roll trade, start the limit debit small, around 15 cent, and then increase the limit debit by a dime every 30 seconds until it fills.  When doing a roll, many times it will fill for a price that is outside of, and less, than the bid/ask prices that are shown.

If you have the RUT Feb 560/570 bull put spread -  If at anytime the RUT drops down to 573 we recommend to immediately roll it to a RUT March 550/560 bull put spread.  Below is what the 4 legged order (many times called a Condor order) would look like.  (this one we show rolling down into a March 540/550, but the March 550/560s should be ok)  Our goal is to roll into a relatively safe March strike prices that is at or just below the 200 day SMA and to pay the smallest debit possible to execute the roll.  If you would prefer to do the roll for even less, or maybe even a small credit, you could roll "right across" into March 560/570 bull put spread, for example, but these strikes have more risk of not expiring out-of-the-money (OTM) in March.  Note the limit price below is a "limit debit".  Most likely it will cost you a debit to do the roll, so this is where you want to put the price in.  Start your price low, for example 15 cents, and then slowly increase it until your roll order fills.  It's good to first do a "test" roll order of just a few contracts to see where it's filling;  then you can fill the rest once you feel comfortable with the debit price and strike prices that you are rolling into.

SPY Feb 103/105 bull put spread - If you have yet to roll these, if at anytime the SPY drops to 105.5, immediately roll your Feb 103/105 to a March 100/102 bull put spread, in a single 4 legged (condor) order.   The short March 102 put is placed right at the 200 day SMA, so this should be pretty safe.

For any other SPY spreads that you might have, keep an eye on them, and if the SPY index drops down to within 0.5 points of your short put leg, it's time to take action and to roll it into March.  It's recommended to pre-build all of your roll trades and save them.

We Recommend the following trades:

Let's hold onto what we have through expiration this week, unless we are forced to close something out early and/or roll it per the instructions above.

The market is still in a correction and only time will tell how deep it will go before it hits bottom and starts to rebound.  The correction primarily got started with concerns about high levels of European sovereign debt, primarily in Greece, and the correction hasn't looked back.  Trade on Friday, however, produced a massive "hammer" candlestick, which is a sign that we could be near to the bottom.  We talk more about this below when we analyze the charts.  Because the market did initially pull back pretty hard on Friday, we were forced to roll our SPY Feb 102/105 bull put spread into March.  Because the US economy is gradually improving and that the US stock market is in a gradual UP-trend, we decided to roll the trade into March giving the trade more time, and at slightly lower strike prices, giving it a good probability of taking a small loss when it expires in March.  Our other February trades are still safe and we need to watch them closely until this correction is over. 

The Big economic news last week was the release of the monthly jobs numbers and it came in with the US economy losing 20,000 jobs in January, and the unemployment rate edging down from 10.0% to 9.7%.  Another big piece of news was that overall job loss since the beginning of the recession that was previously estimated to be 7.4 million lost jobs, was revised upward to 8.4 million lost jobs; so, overall job loss was worse than previously thought.  On the positive side, Cisco Systems released earnings last Wednesday where they beat analyst's estimates, and they guided UP for next quarter stating that they are seeing broad-based strength across all of their business units.

We are 2/3rds through earnings season and so far 78% of the companies that have reported have beat estimates, which is good news.  Below are some of the more closely watched companies that report this week.  Right now, however, since we are in the middle of a correction, if any of these earnings are positive, it probably won't help the markets much.

Mon the 8th - Electronic Arts
Tues the 9th - Cognizant Tech, Coca-cola, Pulte Homes, Baidu, NETGEAR, Walt Disney
Wed the 19th - Level 3, PF Changs, Boston Scientific
Thur the 11th -  Alcatel-Lucent, Pepsi-Co, Chipotle Mexican Grill, McAfee, Panera Bread, Varian
Fri the 12th -  Agilent, Ingersoll-Rand

If you are auto-trading, you don't need to do anything other than make sure that the reserve cash is in your auto-trade account.  The auto-trade accounts have currently allocated 80% of the cash and we rolled the SPY Feb 103/105 bull put spread into March.  You should have 3 Feb spreads and 1 Mar spread in your account.

Per our existing spreads, we recommend the following possible actions if the market continue to pull-back. For each recommended adjustment below, it's highly advisable to "pre build" your 4 legged roll orders and save them so if you need to roll a spread you will be able to roll it quickly.  As a reminder, when we recommend to roll a spread, in order to keep all of your maintenance "whole and in play", you will need to execute the roll in a single, 4 legged trade where you are closing out the existing spread and opening a new spread in a single order.  For more on how to do a 4 legged order please go to the Members Only Learning Center and read the 2 entries on making adjustments and rolling credit spreads.  (We unlocked this document so you can easily get to it without needing to login)   In general, we are recommending to roll into March since the US economy is gradually recovering and the stock market will probably continue to trend upward, albeit gradually, after this correction runs its course.   If you don't believe that the economy is improving and that the stock market will continue to go down over the next few months, you then might consider rolling your spreads down into the same month, so you'll make a clean break out of February.  If you do this, however, your loss will be higher, but you will be making a clean break from February.  If/when you place a 4 legged roll trade, start the limit debit small, around 15 cent, and then increase the limit debit by a dime every 30 seconds until it fills.  When doing a roll, many times it will fill for a price that is outside of, and less, than the bid/ask prices that are shown.

If you have the RUT Feb 560/570 bull put spread -  If at anytime the RUT drops down to 573 we recommend to immediately roll it to a RUT March 550/560 bull put spread.  Below is what the 4 legged order (many times called a Condor order) would look like.  (this one we show rolling down into a March 540/550, but the March 550/560s should be ok)  Our goal is to roll into a relatively safe March strike prices that is at or just below the 200 day SMA and to pay the smallest debit possible to execute the roll.  If you would prefer to do the roll for even less, or maybe even a small credit, you could roll "right across" into March 560/570 bull put spread, for example, but these strikes have more risk of not expiring out-of-the-money (OTM) in March.  Note the limit price below is a "limit debit".  Most likely it will cost you a debit to do the roll, so this is where you want to put the price in.  Start your price low, like 15 cents, and then slowly increase it until your roll order fills.  It's good to first do a "test" roll order of just a few contracts to see where it's filling;  then you can fill the rest once you feel comfortable with the debit price and strike prices that you are rolling into.

SPY Feb 103/105 bull put spread - If you have yet to roll these, if at anytime the SPY drops to 105.5, immediately roll your Feb 103/105 to a March 100/102 bull put spread, in a single 4 legged (condor) order.   The short March 102 put is placed right at the 200 day SMA, so this should be pretty safe.

For any other SPY spreads that you might have, keep an eye on them, and if the SPY index drops down to within 0.5 points of your short put leg, it's time to take action and to roll it into March.  It's recommended to pre-build all of your roll trades and save them.

While we are having a correction, and if you have available cash, it's recommended to continue to bring in premium on the heavy down days.  Freezing like a deer in the headlights is not a recommended strategy in this situation.  As long as the underlying health of the US economy is gradually improving, and it is, we recommend to continue to "gradually collect" premium on the DOWN days.  Our goal is to build up a war chest of cash (premium) to help cover any losses that we might have if we are forced to close out some of  our spreads early.

We Recommend the following trades:

RUT Bear Call Credit Spread
on hold

RUT Bull Put Credit Spread
Sell to open Feb 550 put
Buy to open Feb 540 put - for a credit of 45 to 65 cents.  The short 550 put keeps us 1 strike below the 200 day SMA, which should be pretty safe.  Only attempt to open this spread on the DOWN days, which allows us to collect more premium.  If this spread starts to fill for more than 65 cents credit, suspend any further fills on it and click-down a strike to keep your credit between 45 to 65 cents.  Please take these recommended credit price ranges seriously....don't get greedy and click-down if it starts to pay more than 65 cents.  Make sure not to put spreads that have matching strike prices in the same account.  For more information on why we avoid putting matching strike prices in the same account when using the RUT (or any index where we're opening 10 point wide spreads) please go to the FAQ page at and read the entry "Why do I need 2 accounts when trading the RUT?".

For those who want to trade the SPY we recommend the following trade.  For more information about trading both the SPY and the RUT, please visit the FAQ Page and read the entry "Should I trade both the RUT and SPY?". 

SPY Bear Call Credit Spread
on hold

SPY Bull Put Credit Spread
Sell to open Feb 100 put
Buy to open Feb 98 put - for a credit of 10 to 13 cents.  The short 100 put keeps us below the 200 day SMA, which should be safe.  If this spread starts to fill for more than 13 cents credit, suspend any further fills on it and click-down a strike to keep your credit between 10 to 13 cents. 

We had nasty day today where the markets sold-off hard. The bad news is that the DOW has breached the 100 day simple moving average (SMA).  The good news is that the 10,000 level held, at least for now, today's sell-off was on average volume, and the underlying health of the economy is gradually improving; 80% of the S&P 500 companies are beating earnings targets, and Cisco beat earnings an guided upward, so this good information should sooner or later stop the selling.  The unemployment number comes out tomorrow, Friday, and let's keep our fingers crossed that it's not that bad.  Some economists predict that the rate will increase from 10.0% to 10.1%.  Even if it does come in bad, this information might already be priced into the market, so we'll find out tomorrow.

The daily DOW chart is shown below. We can see that the 10,000 level held, which is a major psychological level.  If 10,000 fails, then 9700 is the next target representing the late October low.  We wouldn't be surprised if the traders and money managers let the DOW deflate down to 9,700, and then they'll probably jump in and snap up shares.

The VIX popped up quite a bit, but within a reasonable and expected range when we are experiencing a strong sell-off.

Please make sure to move reserve cash into your accounts if you have yet to do so.  For our existing spreads, we recommend the following possible action if the underlying indexes continue to drop.  If you are auto-trading, you don't need to do anything other than make sure the reserve cash is in your auto-trade account.  For each recommended adjustment below, it's highly advisable to "pre build" your 4 legged roll orders and save them so if you need to roll a spread you will be able to roll it quickly.  As a reminder, when we recommend to roll a spread, in order to keep all of your maintenance "whole and in play", you will need to execute the roll in a single, 4 legged trade where you are closing out the existing spread and opening a new spread in a single order.  For more on how to do a 4 legged order please go to the Members Only Learning Center and read the 2 entries on making adjustments and rolling credit spreads.  (We unlocked this document so you can easily get to it without needing to login)   In general, we are recommending to roll into March since the US economy is gradually recovering and the stock market will probably continue to trend upward, albeit gradually, after this correction runs its course.   If you don't believe that the economy is improving and that the stock market will continue to go down over the next few months, you then might consider rolling your spreads down into the same month, so you'll make a clean break out of February.  If you do this, however, your loss will be higher, but you will be making a clean break from February.

If you have the RUT Feb 560/570 bull put spread -  If at anytime the RUT drops down to 574 we recommend to immediately roll it to a RUT March 540/550 bull put spread.  Below is what the 4 legged order (many times called a Condor order) would look like.  Our goal is to roll into a relatively safe March strike prices that are 2 to 3 strike prices below the 200 day SMA and to pay the smallest debit possible to execute the roll.  If you would prefer to do the roll for even less, or maybe even a small credit, you could roll into higher strike prices...like the March 560/570 bull put spread, for example, but these strikes have more risk of not expiring out-of-the-money (OTM) in March.  Note the limit price below is a "limit debit".  Most likely it will cost you a debit to do the roll, so this is where you want to put the price in.  Start your price low, like 15 cents, and then slowly increase it until your roll order fills.  It's good to first do a "test" roll order of just a few contracts to see where it's filling;  then you can fill the rest once you feel comfortable with the debit price and strike prices that you are rolling into.

If you have the SPY Feb 103/105 bull put spread - If at anytime the SPY drops to 105.5, immediately roll your Feb 103/105 to a March 99/101 bull put spread, in a single 4 legged (condor) order.  If you want to be even a little more conservative, you can roll into the 98/100, but it will cost you a larger debit to do the roll.

For any other SPY spreads that you might have, keep an eye on them, and if the SPY index drops down to within 0.5 points of your short put leg, it's time to take action.  It's recommended to pre-build all of your roll trades and save them.

While we are having a correction, and if you have available cash, it's recommended to continue to bring in premium on the heavy down days.  Freezing like a deer in the headlights is not the recommended strategy in this situation.  As long as the underlying health of the US economy is gradually improving, and it is, we recommend to continue to "gradually collect" premium on the DOWN days.  Our goal is to build up a war chest of cash (premium) to help cover any losses that we might have if we are forced to close out some of  our spreads early.

We Recommend the following trades:

RUT Bear Call Credit Spread
on hold

RUT Bull Put Credit Spread
Sell to open Feb 550 put
Buy to open Feb 540 put - for a credit of 45 to 65 cents.  The short 550 put keeps us 1 strike below the 200 day SMA, which should be pretty safe.  Only attempt to open this spread on the DOWN days, which allows us to collect more premium.  If this spread starts to fill for more than 65 cents credit, suspend any further fills on it and click-down a strike to keep your credit between 45 to 65 cents.  Please take these recommended credit price ranges seriously....don't get greedy and click-down if it starts to pay more than 65 cents.  Make sure not to put spreads that have matching strike prices in the same account.  For more information on why we avoid putting matching strike prices in the same account when using the RUT (or any index where we're opening 10 point wide spreads) please go to the FAQ page at and read the entry "Why do I need 2 accounts when trading the RUT?".

For those who want to trade the SPY we recommend the following trade.  For more information about trading both the SPY and the RUT, please visit the FAQ Page and read the entry "Should I trade both the RUT and SPY?". 

SPY Bear Call Credit Spread
on hold

SPY Bull Put Credit Spread
Sell to open Feb 100 put
Buy to open Feb 98 put - for a credit of 10 to 13 cents.  The short 101 put keeps us below the 200 day SMA, which should be safe.  If this spread starts to fill for more than 13 cents credit, suspend any further fills on it and click-down a strike to keep your credit between 10 to 13 cents. 

Initial unemployment claims came in higher than expected, along with fear about high European national debt levels, helping the markets sell-off this morning.  The selling came despite Cisco's strong earnings that came in better than expected.  If you want to bring in a small amount of premium today, the RUT and SPY are both filling.  However, the monthly unemployment number comes out tomorrow, and it's possible that the unemployment rate will tick up from 10% to 10.1%, and if this happens the market could sell-off again.  So don't pick up too much premium today as we await tomorrow's big jobs number.

RUT Bear Call Credit Spread
on hold

RUT Bull Put Credit Spread
Sell to open Feb 550 put
Buy to open Feb 540 put - for a credit of 45 to 70 cents.  The short 550 put keeps us 1 strike below the 200 day SMA, which should be pretty safe.  It's best to open this spread on the DOWN days, which allows us to collect more premium.  If this spread starts to fill for more than 70 cents credit, suspend any further fills on it and click-down a strike to keep your credit between 45 to 70 cents.  Make sure not to put spreads that have matching strike prices in the same account.  For more information on why we avoid putting matching strike prices in the same account when using the RUT (or any index where we're opening 10 point wide spreads) please go to the FAQ page at and read the entry "Why do I need 2 accounts when trading the RUT?".

For those who want to trade the SPY we recommend the following trade.  For more information about trading both the SPY and the RUT, please visit the FAQ Page and read the entry "Should I trade both the RUT and SPY?". 

SPY Bear Call Credit Spread
on hold

SPY Bull Put Credit Spread
Sell to open Feb 101 put
Buy to open Feb 99 put - for a credit of 10 to 13 cents.  The short 101 put keeps us below the 200 day SMA, which should be safe.  If this spread starts to fill for more than 13 cents credit, suspend any further fills on it and click-down a strike to keep your credit between 10 to 13 cents. 

Note:  We will not be placing any trades in the auto-trade accounts today since we've already allocated 80% of the cash, and we should wait until tomorrow's unemployment number comes out.

The market is still in the mood to sell, regardless of how good recent earnings and economic data are.  As they say, we can't fight the tape and if the market wants to sell we need to go with the trend and protect ourselves against a falling market.  Because of the strong 5.7% gross domestic product (GDP) release, another justification for weakness is the fear that the Federal Reserve will start to raise interest rates earlier than expected. 

On the topic of protecting ourselves, please read How to make adjustments on credit spread options for a review or primer on different ways to adjust a bull put credit spread.  This information will be helpful as we watch the market this week and get prepared to possibly make some adjustments.  We'll keep you posted via email if any adjustments are required.

We are half the way through Q4 earnings season and so far 80% of the companies that have reported have beat estimates, which is excellent news.  This week 94 S&P 500 and 3 DOW components report earnings.  Below are some of the more closely watched companies that report this week:

Mon the 1st - Exxon
Tues the 2nd - ADP, Dow Chemical, UPS, News Corp.
Wed the 3rd - Time Warner, International Paper, Broadcom, Cisco Systems, Visa, Yum! Brands
Thur the 4th -  Master Card, NCR Corp.
Fri the 5th -  Beazer Homes

The market sold-off hard for 3 consecutive days, bringing the major indices down 5%.  Below we analyze several macro economic indicators making a case that this sell-off will be short lived because the underlying foundation of the US economy continues to improve.

Earnings season kicks into high gear this week where 130 S&P 500 and 12 DOW components report Q409 earnings.  Below are some of the more closely watched companies that report this week:

Mon the 25th - Halliburton, Apple Computer, Texas Instruments
Tues the 26th - Corning, Delta Airlines, EMC, Johnson & Johnson, US Steel, Grainger, Yahoo
Wed the 27th - Boeing, Caterpillar, Praxair, United Airlines, Flextronics, LSI Logic, Qualcomm
Thur the 28th - 3M, Cypress Semi, Ford Motor, Motorola, Nokia, Procter & Gamble, Amazon, Microsoft, Juniper Networks, KLA-Tencor, Sony, Taiwan Semiconductor
Fri the 29th -  Chevron, Fortune Brands, Honeywell, Mattel

Ninety two S&P 500 companies have released earnings to date, and 78% have exceeded analyst's expectation.  So far, so good.

The market is DOWN today so let's start collecting some premium for February.  It's recommended to gradually collect your premium over the next few weeks.  February is a 5 week cycle, and we're only in the first week, so we have plenty of time to collect premium.  For more on this topic please visit the FAQ Page and read the entry entitled "What % of my trading capital should I use in a single day?".  Because we are seeing weakness in some of the indicators, and because the market is priced for perfection, we probably will see more choppiness now, and this is good for us credit spread writers.

We hope everyone was able to take some time off on Monday in honor of Dr. Martin Luther King, Jr. to celebrate a man who helped promote equality for all human beings, regardless of the color of their skin. 

The January cycle is complete and the MCTO team brought in 5.5%.  For more on the January trades and returns please visit the ROI Page. 

Because we were feeling uneasy about the market possibly rallying after Intel announced its earnings, we recommended everyone to close out all/most of our short calls, just to keep us safe.  It's always wise to be safe rather than sorry when opening index credit spreads.  The rally, however, never materialized, and the market actually sold off on Intel's excellent results.  This was the first time in 5 months that the market sold-off on good news.  JP Morgan's earnings actually beat analyst's estimates, but the CEO made negative comments about future guidance, and the quality of their earnings were not that great.  Additionally, consumer confidence climbed but missed expectations.  Over the last 5 months, however, the market shrugged off negative results like this, and a little miss in consumer confidence was never a big deal.  So what we saw this time was institutional money managers selling on the good news of Intel blowing out their quarter with a 1000% increase in earnings and excellent forward looking guidance, which tells us a lot.  Intel is classified as a bellwether since semiconductors are high in the supply chain, so when Intel shows strong results, it tells us that systems companies that make the DVD players, laptops, servers, communications gear....etc. are ramping up production, and that the technology sector is expanding. The market, however, ignored this information and sold off.

This sell-off is actually good news for us credit spread writers.  We've been struggling over the last 5 months to open relatively "safe" spreads because we needed to be extra careful as we watched for market surges, or strong pull backs.  The market now sent a message that the indices are richly valued and that earnings, and top line revenue growth, are going to have to be very good to justify the current levels.  Therefore, the market will probably start to have more evenly distributed UP and DOWN days, giving us more opportunities to open our credit spreads.  (for the last 5 months we've had 5x more UP days than DOWN days)  We also will have to be more careful on the bottom bull put spreads, since a shot was fired "over the bow" (i.e. the market sold off after the excellent Intel results) so we could see some strong DOWN days.  Overall, when we see a market like this that probably will start trading more sideways and choppy, with still elevated volatility in the 17 to 22 range, this is good news for us and we should have very good returns over the next 4 to 6 months.

Earnings season begins to pick up steam this week where 57 S&P 500 and 5 DOW components report Q409 earnings.  Below are some of the more closely watched companies:

Tue the 19th - Citigroup, CSX (railroad), IBM
Wed the 20th - Bank of America, Morgan Stanley, Wells Fargo, Starbucks
Thur the 21st - Charles Schwab, Goldman Sachs, Xerox, AMD, American Express, Google
Fri the 22nd - Air Products, GE, Harley Davidson, McDonalds

So far, of the companies that have announced Q4 earnings, 18% have exceeded analyst's expectation.  Right now it's a little early to come to any conclusions.

We recommend the following trades

We'll be sending out an advisory early this week with our recommended trades.  Most likely we'll be jumping in sooner this month, especially with our top spreads.

Below are the charts for the DOW, SPY - an ETF that tracks at 1/10th of the S&P500 index, NASDAQ Composite Index, NYSE Composite Index, and IWM - an ETF that tracks at 1/10th of the Russell 2000 small cap index.

The daily DOW chart is shown below.  It attempted to rally above past resistance of 10,500, but failed and pulled back to close at 10,428.  The DOW has been trading in a tight range between 10,240 and 10,500 since mid-November.  Per upside potential, when the DOW does finally breakout to the upside, two possible targets are 10,860 and 11,000.   The first target of 10,860 is calculated using the theory of a measured move, which states that when a stock or index breaks out from a sideways, consolidating phase it will rally upward (or downward) a distance that is equal to the range of its consolidation.  In this example, the DOW has been consolidating between 10,240 and 10,550, which is a 310 point range.  Thus, when it finally breaks out to the upside, a measured move target would be 10,550 + 310 = 10,860.  The second potential target shown is 11,000 and is estimated from the top, upward sloping trend line, as drawn, assuming that the market rallies over the next 30 to 40 days from good earnings.  Per downside potential, we show 3 possible support levels:  There is a good chance that 10,240 will hold as support representing its 50 day SMA, the bottom of its sideways consolidating channel, and the bottom of its upward sloping channel.  If the 10,240 level fails to hold as support, there is a very good chance that the 10,000 level will hold as support representing the Oct high that was a past resistance level and should now have switched to a support level, the 100 day SMA, and that 10,000 is a major psychological level.   If 10,000 doesn't hold, there is an excellent chance that 9,700 will hold as support representing the October 30th low.  The MACD and Chaikin Money Flow indicators are sending mixed signals and don't help us much.  Overall, we believe the DOW will hold above 10,000, even during a heavy pull-back.  For more on the technical analysis that we use please visit the Learning Center. 

The daily SPY shown below (an ETF that tracks at 1/10th of the S&P 500 Index) attempted to rally above past resistance of 112, but failed.  When the SPY does finally rally above 112, a potential target based on a measured move is 117.5 (113-108.5=4.5; 113+4.5=117.5)  We continue to show 112 because this is the resistance level that the SPY still needs to break above before it will rally to a new high, but the sideways consolidation range is now 108.5 to 113 and this is the range that is used to calculate the measured move.  Looking at the top upward sloping trend line, as drawn, and assuming that earnings are good and the SPY rallies over the next 30 to 40 days, a potential target is also 117.  So we get about the same estimated target from both the trend line and the measured move calculation.  Per the indicators, they are sending mixed signals, but the MACD is showing positive divergence and showing strength is building up.  For downside potential, there is an good chance that the 109 level will hold as support representing the 50 day SMA, the Oct high that was past resistance and now should be support, and the bottom of the recent sideways consolidation channel.  If 109 fails, there is a very good chance that the 107 level will hold as support representing the 100 day SMA and the Sep high that should now act as support.  If not, then there is an excellent chance that the 103.5 level will hold as support representing the October lows.  If/when the SPY has a heavy pull-back, we believe that the SPY will hold above 107.

Below is the NASDAQ Composite Index (COMPQ).  We can see that it broke out and created a new, upward sloping ascending triangle.  This rally also widened the 2 standard deviation Bollinger Channel, telling us that if the COMPQ were to correct, it could more easily correct down to 2140, which is the bottom of the Bollinger Channel.  The indicators are neutral and don't help us much in predicting which way this index will break out.   Per downside potential, we believe there is a good chance that 2120 will hold as support representing the 100 day SMA.   If 2120 doesn't hold, we believe there is an excellent chance that 2040 will hold as support, representing the October lows.  Overall, we believe that the 2120 level will hold as support if we have a strong pull-back.