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Market Updates

Retail sales surge 7.1%

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Financing incentive as low as 0% financing had the consumer spending at the retail level at a record pace. Today's retail sales number showed a surge in October of 7.1%, which was the largest monthly rise since the retail sales data series was launched in 1992. Economists had expected retail sales to rise 3.2%. Excluding automobiles, sales rose just 1%, but still higher than economist's estimates for a 0.2% increase.

Stock futures higher

Stock futures are higher again this morning with S&P futures up 8 points to 1,150. NASDAQ futures are up 35 points at 1,617 and Dow futures are showing gains of 61 points at 9,825.

Fair value for the S&P 500 today is $1.05. HL Camp & Company has their computers set for program buying at $2.10 and set for selling at $0.70. Fair value for the NASDAQ-100 today is $3.00.

Is it too late?

Yesterday we received several e-mails from subscribers asking the question, "Is it too late to get involved in this rally?" I don't think it's too late, but you need to be careful with the stocks you're buying.

In recent months, we've talked in depth regarding several options strategies called "straddles" and "strangles" where the trader/investor establishes a position in both a call and put. Later today we'll look at some stocks that might be prime for such a strategy.

We'll also be talking about the closing out of a "strangle" in shares of Microsoft (NASDAQ:MSFT) that hit our original target yesterday at the $67.54 level.

Personally, I think a trader should be careful with some technology stocks at this time, or at least be cautious. The NASDAQ-100 bullish percent is now at "overbought" levels and bulls carry the bulk of the risk at current bullishness. Technology stocks I'd be looking at are those that are breaking out of bases, not those that look overextended on their charts, where a pullback leaves me feeling like a "Johnny come lately."

It's also important for those traders/investors that did come to the market when bullish percent data first started reversing higher and slowly added bullish positions to their accounts (or at least traded some) to not get carried away as their accounts have undoubtedly added gains in recent days.

Stay disciplined and remember what got you here. It wasn't a euphoric half-baked trading plan. It was discipline so don't forget that. Stick with what has been working. When it begins to not work, then you know there is some type of change starting to occur and time to research what may have gone wrong.

Too often, traders find a strategy that is working excellent, but when it begins to fail, they continue to suffer losses by implementing the now losing strategy again and again. This is not the way to trade/invest.

For those just starting to feel some confidence in the market and ready to dip their toes in the water, look at the financial area of the market.

The bullish percent for the S&P 500 is not "overbought" at this time and a trader just getting involved in things, is less likely to suffer a large loss should the markets take a rest.

There are most likely as many institutional investors that are feeling late as some subscribers that were just too nervous or unsure about things in October. This is OK. If you had invested/traded in October and were unsure, you were probably trading with emotion and not going to do very well anyway.

If you get a chance, go back and review some of the intra-day market commentary. Perhaps take some notes regarding what was taking place. What worked in the market commentary and what didn't? Where are some of those stocks doing today? Are the things we were talking about still in play today? If so, then perhaps that is an area to be looking for some trading ideas.

If you think a stock has "gotten away" from you, then let it be for now. Let the stock show some type of consolidation where you can then control your risk better and identify a stopping point. A stock that has been on a steady run for 2 weeks is tough to trade or establish a stopping point. A stock that has had a one week run, then consolidated for a week gives the trader a more defined action point for a trade and placement of their stop.

While a "tech bull" may be a little late, it's always better to be late, than to never get involved, but you've got to stay disciplined.

Jeff Bailey
Senior Market Technician
Option Investor

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