Market Report: Do You Really Trust It?: Thoughts From a Skeptical Eye

As of 1:00 p.m. CT, the Dow just ticked up 300 points on the day. What a move!

But before jumping on the bullish bandwagon, allow me to highlight some important technical considerations. First and foremost, consider this: The Dow has just popped its nose above the critical resistance level at the 200-day moving average. I don’t know about you, but considering the tremendous amount of market volatility we’ve seen lately, I would have to think that the major market averages encounter downside pressure at this level.

Another consideration…

Most of this rally, which began yesterday, was sparked by the financial sector after Citigroup (C: NYSE) received a $7.5 billion capital injection from Abu Dhabi Investment Authority. According to preliminary reports, the world's largest sovereign wealth fund is purchasing a 4.9% stake of Citigroup, the largest U.S. bank, which bolstered confidence in the financial sector and sparked today’s rally.

Adam and I both believe that this euphoria is a temporary event.

After all, we all know that our credit problems are far from over, and the news out of Citigroup yesterday is nothing more than a short-term Band-Aid. As a result, I just made two new plays in each of my trading services that’ll capitalize on this situation.

In WaveStrength Options Weekly, I used today’s market upside as a prime opportunity to add put options on JPMorgan Chase (JPM: NYSE). And in Bottarelli Research, I used today’s upside to add put options on Lehman Brothers (LEH: NYSE).

Looking specifically at JPM, the stock has lost 13.23% over the last 52-weeks, thanks to quarterly revenue growth that’s lost 2.8% year over year. With those statistics, it’s no wonder that JPM stock just set new 52-week lows on November 20 and November 21. But today, with the entire financial sector piggybacking Citigroup’s news and trading higher, you have a great opportunity to add puts. If our WaveStrength charting is correct and JPM stock moves lower, we plan to lock in a winner anywhere between 83% and 122% over the next four to six weeks. Hopefully, you’re positioned along with us to participate in these profits!

Bryan