In early trading Friday the Dow was up 370 points above its Thursday's close. It closed Friday with a 208 point loss, 578 points lower than Friday's top tick. Then, in Friday's after hours trading, Dow futures lost another 350 points. That's close to a 900 point total decline going into another weekend of the twin wild cards: Coronavirus and civil unrest. Thus, the table is set for Monday. Will the Fed bail out the financial markets yet again? The Dow Futures start trading Sunday at 3:00 PM PDT: Real Time Dow Futures Quote. The Big Picture On the chart below June 8th marks the orthodox top of a Wave 2 countertrend rally up that has been so frustrating for past three months. Wave 3 down has finally begun. Most of our trading signals for the next few months will be on the short side. Volatility will be a buy for weeks, if not months down the road, leading up to the election on November 3rd, one that is shaping up to be the most volatile elections on our nation's history. Will the market even open on November 4th? Will the country ever agree on who is the next legitimate President? Has the mayhem of the past weeks been but a trailer for the main feature to follow come November? We have a little over four months to strategize for that contingency. In the meantime we will make the most of what the market patterns give us. If the EW analysis in the Dow chart below is even close to correct, those patterns and attendant signals will be all we can handle, and in a good way. Wave 3's are why we trade options. Let it rip. Dow Jones Industrial Average VXX Hourly Options Direction matters. If the time spent on selecting the "right" option for every scenario was instead spent on getting the trade right, we would all be better traders. General rules: For short term trades go out about a month. For intermediate term trades go out about 2-3 months. Always choose the "monthly" expiration (3rd Friday of the month) - you will never lose track of when your options are going off the board. Pick at or slightly out-of-the-money strikes. Shake well and whichever of those options has the most volume, buy. There never is that one "perfect" option for any particular signal or intermediate term trend. Think in terms of one from each grouping and I'll be adding others as time and price dictate. As for VXX, it's volatile enough on its own without needing the additional leverage of calls...just not as much fun you get it right.
