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Thursday, January 14, 2010

TRADING SYSTEM SIGNAL - OPEN FEB POSITION

Our "window of opportunity" is beginning to open up and it's time to initiate our February position. It's a new year and with it comes the hope that the economic recovery will be confirmed by the guidance from the 4th quarter earnings announcements to come out over the next 2 or 3 weeks. Just in case things aren't as rosey as the Market has priced in we'll make sure our position is properly hedged to protect us from a downside earnings season surprise. Volatility has come down to more comfortable levels with the VIX closing under 18 on the 11th. But we'll stick with our Calendar and Butterfly strategies in case the apple cart gets upset.

We are in a Market Structure Stage 2 on the Daily Chart, and a Stage 3 consolidation occurring on the 30m Chart. So we'll set up for business with a Calendar Spread at the 114 strike:

Calendar Spread

Open - 6 Mar/Feb 114 SPY Call Calendars for about $0.98

Hedge the Calendars:

Open - 1 Feb 108 SPY Put at about $0.98 (1 covers 6 Calendars)

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Trading the Market Structure

Trades are set up using the "Trading the Market Structure" method. It is derived by taking the most common trading methods, Delta Neutral Trading, Swing Trading, and Trend Trading, and combining them into one system. By combining them in this fashion they offset each other's weaknesses, thus creating an unusually effective strategy.

To begin to understand the simple technicals behind this Trading System set up your Weekly, Daily, 30 minute, and 10 minute charts with these links:

Market Structure/Entry Points/ Weekly Chart/ Daily Chart/ 30m Chart/ 10m Chart

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