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Tuesday, January 19, 2016

A volatile start to the week as the Dow bounced around and finished the day with a gain of 27 points on heavy volume.  The advance/declines were 2 to 1 negative.  The summation index continues lower.  We tried to rally today off of the short term positive divergence in the McClellan oscillator but could not hold on.  My check of the charts over the weekend revealed that there is a chance that we could have one more final wash out before we get going to the upside.  The odds do favor that the decline has ended though.  However we have to look at all possibilities and with continued poor breadth it's possible for one more down draft.  So the puzzle still remains unsolved for now.  We did not crash today and that's a plus.  If we get a nice rally tomorrow, the lows are probably in.  GE was flat on the day on average volume.  I did place an order for the February calls here but it wasn't filled.  I'm leaving an open order in overnight.  Earnings due Friday and I would like to have a long position before then.  Gold was off a couple bucks on the futures as the US dollar was slightly higher.  The XAU fell 2 1/2, while GDX shed 2/3.  Volume was good.  The drop in the gold shares does not bode well for gold.  Gold and the gold shares are dead money.  It looks like the gold shares are as low as they could possibly go and still nobody wants them.  Mentally I'm feeling OK.  I'm back to the normal schedule.  I do believe that this week is the key as to where we are going for the February option cycle.  Getting calls will be the proper choice.  The timing will be the overall challenge.  If we do move higher from here, waiting for a pullback will be required.  If we get some high volume washout to the downside, getting in near the bottom will be the strategy.  We are going to have to let the market dictate the trade in the SPY.  There is also an extra week in the February option cycle to factor in.  So as usual it won't be easy.  I'd like to own GE calls before Friday as it is oversold and good news on the earnings front should be rewarded.  However it is a risky ordeal as the earnings can cut both ways.  So we'll see.  The market did shrug off bad news from China and that is a plus.  We'll keep an eye on the overnight action as always and go from there.

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