The futures are up big-time this morning before the opening bell as Wall Street seems to loving the fact that China has approved a $586 billion plan to stimulate its economy. Around the world, stock markets were up on the news which should lead to a higher open on Wall Street this morning.

China’s Shanghai Composite Index soared over 7% to 1,875 after news of the stimulus package circulated which is intended to help turn around the economic slowdown. The Shanghai, much like Wall Street did in October, had tumbled more than two-thirds before last night’s rally.

The FTSE 100 index (British) was up 120 points, at 4,485, while Germany’s DAX was higher by 145 points, to 5,083. France’s CAC-40 was surgung 109 points, to 3,577. Elsewhere, the Asian markets rallied overnight as well. Tokyo’s Nikkei 225 surged nearly 500 points, to 9,080, while Hong Kong’s Hang Seng Index also gained 500 points, to 14,744.

Wall Street is expecting to open higher following Friday’s 250 point increase, with Dow futures up 100, at 9,096. They were up nearly 200 points earlier this morning. There’s a lot of moving parts this morning with both good and bad news so it will be a battle to end in positive territory once again.

McDonald’s (MCD, $54.17, down $55.47, up $1.30) should add to Friday’s gains after reporting October figures that once again beat Wall Street’s expectations. On the flip side, General Motors (GM, $4.36, down $0.44) could take another hit today after it was downgraded to “Sell” from “Hold” with a $0 price target by Deutsche Bank. Yikes. DB believes the auto maker may not be able to fund its U.S. business past December without government intervention.

If the government can sling a $150 billion financial-rescue package to troubled insurance giant American International Group (AIG, $2.11, up $0.24), including $40 billion for partial ownership, then they better step up to the plate in a hurry. There’s more ducks on the pond looking to score on taxpayer’s money.

Rick Rouse
Rick@OptionsMentoring.com

Welcome to a new day and a new America. Senator Barack Obama made history by winning the U.S. presidential election and it was finally nice to see some energy in our country. Polls were packed, people waited in line for hours and America seemed to come together as we all look forward to the future. Not only is it a new America but it will also be a new Wall Street.

It was pretty much a given that Obama was going to win and the market rallied on Tuesday. However, European stock markets traded lower last night (their Wednesday) ahead of the expected soft opening on Wall Street.

Dow futures are down 101 points which means we are going to be starting the day off in the red. I had mentioned if Obama wins and if the Democrats took a firmer hold on Congress, the market could retreat.

We are looking at a triple-digit loss right off the bat for the Dow but the mood this morning is not one of panic and it doesn’t feel like one of those days where the Dow is going to tank. If we can keep the Dow to a under a 200-point loss within the first hour then there is a good possibility where could battle back by the end of the day. Then again, the market could sell-off but I think with the Dow doing some “back-filling”, it would be healthy.

Rick Rouse
Rick@OptionsMentoring.com

The market had its least volatile session in well over a month as Wall Street ignored some weak economic news (what else is new) and instead chose to focus on today’s upcoming election. The Dow started Monday off slightly higher but we did not get the 100 point open in either direction as we have been seeing.

Before finishing essentially flat, the Dow moved in a range of about 150 points which was well below well October’s average daily swing of 600-700 points. The bulls were scared to take positions ahead of the rally in what could be a democratic sweep while the bears looked content on targeting the next area of weakness. We also saw a lack of action in the often-volatile final hour which proved yesterday’s overall sentiment was tentative.

As a result, the Dow fell 5 points, to 9,319 but did hit a high of 9,410. The S&P 500 dipped 2 points, to 966, while the Nasdaq squeezed out a small gain of 5 points to close at 1,726.

Perhaps the biggest news of the day concerned the auto companies as they reported weak sales for October. Although credit is tight, consumers are certainly staying away from showrooms and keeping what they have running. General Motors (GM, $5.65, down $0.14) U.S. sales plunged 45%, Ford Motor (F, $2.13, down $0.06) sales fell 30%, while Toyota Motor (TM, $76.66, up $0.57) sales dropped over 20%.

The news means that U.S. auto sales are in a tailspin and are at their weakest monthly levels since 1983. Cars and light trucks dropped to 840,000 in October after falling below the 1 million threshold in September for the first time in 15 years. In case you are counting, it marked the 12th consecutive monthly sales decline. The group needs the government’s help but so far nothing has been done to help the struggling industry.

The market is looking to bottom and only time will tell if October 10 was the low. However, the first few weeks of November are often bullish and there is often a relief really after the election is resolved. Last week the Dow added over 11%, its best weekly performance in nearly 35 years, while the S&P 500 and Nasdaq added over 10% as well.

The calm from yesterday doesn’t necessarily mean the market has overcome all its worries but things are improving. Remain cautious but all signs are pointing towards a push to 10,000 for the Dow.

Rick Rouse
Rick@OptionsMentoring.com

The market is not out of the woods yet. U.S. elections will take center stage on Tuesday and many experts believe the outcome has largely been priced into stocks (meaning an Obama victory). The chatter this morning is that if the Democrats sweep it could pave the way for higher taxes. The spin on this is that it would not be good for the market.

The “big news” this past week was that the Fed lowered interest rates to 1% and world banks are lowering their rates as well. All of this is intended to stimulate a sagging global economy but we are looking at several quarters before we see any significant improvement. The problem has not been liquidity and the cost of money, but the willingness to lend is just not there. Investors and banks are hoarding cash.

Which leads me to the hedge fund industry. I’m not sure if this possible bomb is priced into the market but we better prepare for it. The industry is poised for a massive shake-up as investors demand the return of billions of dollars from both struggling and even funds that have posted positive returns. I’m hearing that anywhere from 750 to 1,000 hedge funds could be closing shop by year’s end. Yikes.

The squeeze on hedge funds from the credit crunch goes hand-in-hand with what makes many of them successful. If you recall, we had a recent ban on short selling instituted by the Securities and Exchange Commission as a result of the credit crisis which eliminates an important trading tool for hedge fund managers. The credit tightening itself also limits their ability to use credit to add leverage. While it’s not yet clear how many investors have submitted redemptions or will be liquidating their positions over the next few months, it is something worth watching.

The Dow is trading higher by 26 points to 9,350 a half hour into trading this morning. The index held support at 8,000 last week which was slightly higher than the 7,773 October 10 low. After an initial move down at the open, the Dow is looking to test 9,400-9,500 today.

A close above those levels would signal a new pattern of “higher highs” and could lead to a push towards 10,000. It has been hard to trust this market but it does appear that we might be carving out a trading range up until Thanksgiving. However, I wouldn’t go out and buy just call options. I still think its best to have both call and put options in your portfolo as some sectors look strong while others continue to look awful.

Try to buy put options on rallies and call options on declines like we did with the casino stocks. Also keep in mind that the volatility may have subsided for the time being but it will be back. The Volatility Index (^VIX, 58.43, down 1.46) is still quite high but has come down from a high of 90 as the market has rallied.

Historically speaking, if the VIX is at 30 or more then it means the market is nervous. If the VIX is under 20, the market is confident. It’s not clear what the “new” standards should be for the VIX because the volatility has also been historic. However, as I mentioned earlier, the market still has some issues that it needs to deal with before we can consider this a bull market.

Rick Rouse
Rick@OptionsMentoring.com

The market has been in and out of positive territory following yesterday’s huge rally, as the bulls and bears position themselves ahead of today’s decision on interest rates from the Federal Reserve. The Fed is expected to cut rates by a 1/2 or 3/4 of a point but Wall Street also taking bets on a smaller or wider cut. The current rate stands at 1.5%.

If we get a 1/2 point then we are right back where Greenspan had us. The big arguement is that this is why we are in a “recession” because money got so cheap to borrow. That is a can of worms that I’d rather not open because all we care about is figuring out which way the market is going to move.

Depending on the rate cut number, the market could rally, have a major sell-off or simply remain flat. I highly doubt the latter will happen because of the recent volatility. In fact, the market has made at least a 400 point swing in 20 out of 21 trading days this month. Many of the moves have been in a much higher range and we have probably averaged something like 700 points swings for the Dow.

Yesterday’s 900 point rally was impressive but we should know real soon if it was a bear market rally or if it is a rally that has legs. The Dow is up 63 points to 9,128 and we are about an hour away from the rate cut news. If we get anything less than a 1/2 point cut, it’s hard to say how the market will take it. Many expect a sell-off but it doesn’t really matter what the rate cuts are. Money is already cheap and the entire banking system is a mess. However, today’s news should move the market by triple digits one way or the other.

Rick Rouse
Rick@OptionsMentoring.com

The market staged a furious rally on top of the one it had going in the final hour of trading that lifted the Dow to its second-largest point gain ever. The Dow rose 890, or 11%, to finish at 9,065.12. The biggest point gain for the Dow was 936 back on October 13. In the final hour alone the Dow doubled its 450 point gain it had going for the day.

The market surge came on no real newsworthy event although the bulls are expecting an interest rate cut on Wednesday by the Federal Reserve. The bounce could be attributed to testing a bottom but the Dow hasn’t tested its October 10 low of 7,773 (yet). For now its looks as though 8,000 is providing support and the close above 9,000 was bullish. Very bullish.

The rally was also surprising given the weak consumer confidence report that came out earlier in the day. The index fell to a record low of 38 for the month, well below 51 which was what Wall Street had expected.

Of course, with today’s rally we saw some huge moves in quite a few of the Dow stocks. Alcoa (AA, $10.78, up $1.74), Exxon Mobil (XOM, $74.86, up $8.77) and Chevron (CVX, $70.02, up $8.31) all had oustanding days rising 13%-20%. Verizon Communications (VZ, $31.65, up $4.04) added another 15% on top of Monday’s 10% gain. The oil stocks zoomed higher despite another drop in the price of crude which is now at $62/ barrel.

If we can get through this week without a test of the October lows then we could be setting up for a decent rally. The bulls seem to be charging ahead as if the market has made a bottom. One thing I can say about the bears. They might not be spitting in the wind but they may tug on Superman’s cape (meaning the bulls) one more time before we are officially out of October.

Rick Rouse
Rick@OptionsMentoring.com

The straw that might break the camel’s back could be falling today as the market is struggling halfway through the trading session. Other markets around the world plummeted Friday as world governments and central banks seem helpless in stopping the inevitable — a global recession. I’ve mentioned all week how we look poised to test the market’s lows and we may get that in the afternoon session.

Oil continues its freefall despite a decision by OPEC to slash production by 1.5 million barrels a day for next month. Believe it or not, oil is at $63/ barrel and looks headed to the $50’s. Good news for gas.

Gold is also taking a hit, falling as low as $680/ ounce. What has once always been considered a “safe haven”, gold is now at its lowest levels since January of last year.

The Dow is still currently trading above its October 10 lows but is still down 358 points to 8332. It was a scary pre-market environment this morning as the Dow futures had dropped 550 points. That would have been a 700-900 point bomb that would have hit the market at the open. It is extremely rare that futures drop this low before the opening bell which triggered a temporary halt to slow the decline.

Usually when the market reaches these chaotic levels the New York Stock Exchange could be forced to use “circuit breakers” that could lead to temporarily shutting down trading. This hasn’t happened in over 10 years but would take effect if the Dow drops 1,100 points before 2pm.

The VIX (^VIX, 77.93, up 10.13) popped up to 90 this morning. If you haven’t read my blogs about the VIX, type in “VIX” in the search box there on the right of this webpage.

The last hour of trading is likely to be something to behold. We did well playing the market bounce at the beginning of the week and I have been preparing us for another test of the lows. I’m not sure if we get there today but it looks as though the bears are holding pocket Aces. We will have to see how this plays out but the market is setting up nicely for us to get into a big, big pot.

Rick Rouse
Rick@OptionsMentoring.com

After taking one big step forward, the market took two steps back on Wednesday as the Dow fell 733 points, or 7.9%, to close at 8,577. Of course, we are not surprised because we have been preparing for it. Yesterday’s downfall was blamed on bad retail sales data as September sales tumbled 1.2% month-over-month. Biggest drop in three years. The news was a shocker for Wall Street as it was a larger than expected drop. Know-it-alls predicted a decline of 0.7%.

As far as the indexes, the Nasdaq took a 8.5% hit and finished lower by 150 points at 1,628. The S&P was hit harder than a Vegas hangover, falling 9%, or 90 points, and closed at 907.

The Dow’s low last Friday was 7,773. For the Nasdaq it was 1,542 and for the S&P it was 839. So far we’ve been right-on in calling this market and we have prepared for a bottom, played the bounce, and now we must get ready for the possibility of testing those lows again. Remember, I keep telling you October will continue to be like this. That is why we are taking half positions over the short-term/ long-term and cashing in on profits by keeping tight stops.

As far as the bounce, it was good for a quick trade in Microsoft (MSFT, $22.66, down $1.44), Google (GOOG, $339.17, down $23.54) and Johnson & Johnson (JNJ, $60.54, down $3.46), Morgan Stanley (MS, $18.13, down $3.81) and Goldman Sachs (GS, $113.15, down $8.75). Keep an eye on the calls I have mentioned. Some of them are still higher but they may get cheaper. So here is the game plan.

First, if you take any positions, only start with a half position. What that means is that if you normally buy 10 option contracts at a time, buy five. The market keeps showing signs of another breakdown and to me, that would be the best thing that could happen.

Of course everybody is going to question the bailout package but the market needed to do its own cleansing and needed to make its own low before Congress jumped in. The truth is that Bush didn’t want a crisis and they wanted to jump start the market because it was at multi-year lows. But the reality is the market has to make a bottom on its own.

I studied charts until I was light-headed last night and here is my best/ worst case synopsis. I’ve already been calling for this decline since August before we hit last Friday’s lows. In fact, in the October 7 blog with the Dow at 9,447, here was what I mentioned:

“I’m not making any predictions on how low the Dow can go because on any given day we could get some kind of “miracle news” that takes the Dow higher by 1,000 points but from my study of the chart for the Dow, it looks like we could test 8,300. That’s another 1,000 points lower. From there it gets real ugly.”

Well, we got that and then some, son. I only repeat myself a thousand times because, again, I want to make you aware of what type of market we are in. You have to have a quick trigger and know what is happening. Having said that, there is support at 7,200 for the Dow but that’s another 1,300 points lower.

Although the talking heads thought last Friday’s 7,700 level was “the” bottom, some research will shed a different light on the subject if you are willing to do a little homework. This market can float like a butterfly and sting like a bee, that’s for sure. But it’s up to you to stay on your feet so that you can beat the Street. Don’t fall in love with any positions (yet). We still have earnings and October options expire next Friday.

Drumroll please…it’s possible we test those lows for the Dow (7,200) by next Friday with the hope of the market rallying afterwards.

Rick Rouse
Rick@OptionsMentoring.com

The relief rally was on today as the Dow zoomed 936 points as bulls rushed in to buy stocks that have been beaten down 50%-80% in just over a month. If you read the blog that I posted over the weekend, then you could tell how excited I was to go long the market. There were a ton of positions that could have been bought at the open this morning and it felt like I was going Christmas shopping on the Friday after Thanksgiving. That day is the biggest shopping day of the year as consumers rush to the malls at 4am to get the best deals. That is exactly what was happening at the opening bell this morning.

The Dow was up a quick 400 points right off the bat and its 11% gain was ithe biggest since the Great Depression. For the record, the Dow officially closed at 9,387. The “dead cat bounce”, “relief rally”, “oversold rally” or whatever you want to call it also pushed the S&P 500 and Nasdaq higher by 104 and 195 points, respectively. The S&P 500 closed at 1,003 while the Naz closed at 1,844.

But can the rally be trusted? The key point I made over the weekend was that you should only be looking out 6-12 months and it is hard to say if this rally will hold. However, today was our shopping day and here is what I had on my Christmas list from the weekend for my Lottery Play Portfolio.

Microsoft (MSFT, $25.50, up $4.00). If you’ve been reading the blog then you know how much I’ve mentioned this stock. This company has over $20 billion in cash and no sub-prime exposure. Share buybacks, dividend distributions, and acquisitions have eaten away at the company’s coffers - two years ago they had nearly $60 billion but the company’s products still generate about $1 billion a month. The stock fell to a low of $20.65 Friday. This morning, the April 25 calls (MSQDE, $3.30, up $1.30) opened at $2.35 and closed 65% higher for the day. Even at $2.35, you still got a 40% gain if you bought at the open. The April calls are over 6-months out and expire on April 17, 2009. If these calls get back to this level, don’t hesitate to jump on the. If you got in today with a half or full position then you could set 25% stops in case the stock retreats.

Google (GOOG, $381.02, up $49.02) turned out to be a “Blue-Light” special as it rallied 15%. This stock was on sale at half-off from its 52-week high of nearly $750 and the March 500 calls ($19.40, up $6.20) opened at $11.50 and briefly traded over $20. Google still has earnings so if you got in early, set stops at $15 or so.

Yahoo (YHOO, $13.49, up $1.20) fell below $12 last Friday and although it didn’t get the big pop Microsoft and Google did, it still managed a 10% gain. I didn’t go too far out on Yahoo call options because I still think the company is a mess (not taking the $33 a share from Microsoft still haunts shareholders). Remember though, we are not trading on fundamentals for some of these plays, just on what appears to be cheap. The January 17.50 calls (YHQAW, $1.33, up $0.06) were the most active but I don’t expect much from this one. In fact, set stops 20% below your entry price instead of the usual 50%.

Johnson & Johnson (JNJ, $62.68, up $6.83) was a no-brainer and a really safe play. The stock was up over 12% and I had mentioned the big drop after hitting a 52-week high a month ago. The November 60 calls (JNJKL, $4.70, up $1.70) opened at $3.30 as volume came in at 4x open interest. I love this stock for the short and long-term which is why the April 70 calls (JNJDN, $2.00, up $0.50) looked like a down-right steal at $1.50 this morning. If you missed today’s jump you could start building half-positions even at these levels.

I didn’t like General Motors (GM, $6.51, up $1.62) and still don’t although the 33% rally today was very impressive. We rode Ford and GM all the way down to these levels a few months ago and while there may or may not be bankruptcy in their future, I just think there are better trades out there. If you are a die-hard bull, the GM 2010 January 5 calls (WGMAA, $3.65, up $0.50) saw a lot of action as nearly 5,000 contracts traded. The 7.50’s (WGMAR, $3.15, up $0.65) weren’t nearly as popular, trading only 200 contracts.

Arch Coal (ACI, $27.32, up $5.28). The November 25 calls (ACIKE, $5.20, up $1.60) opened at $4.50.

Massey Energy (MEE, $26.47, up $5.74). The November 25 calls (MEEJE, $1.85, up $0.75) opened at $1.00.

Patriot Coal (PCX, $19.50, up $4.90) also made a nice comeback. The November 20 calls (PCXKD, $3.60, up $1.40) opened at $2.40.

There were a couple of other energy stocks I mentioned but I didn’t want to go too heavy on the sector.

Morgan Stanley ($18.10, up $8.42) was a huge story today after the company nearly went bankrupt last week. The investment bank went through a zany week of trading as many on Wall Street pondered its future. Mitsubishi Financial Group of Japan was the knight in shining armor for Morgan as they made a $9 billion investment in the company. The October 15 calls (MSJC, $3.80, up $2.61) were up 220% today.

Goldman Sachs (GS, $111.00, up $22.20) has made up 40 points since hiting a low of $74 last Friday. What a steal it was below $100 or even $80 for that matter. Remember, Buffett is in at $5 billion with another $5 billion waiting in the wings. The October 100 calls (GSJT, $15.50, up $10.00) opened at $6.95. An easy double as the day went on. If you bought at the open, set stops at $11.00. The January 125 calls (GSAE, $11.60, up $4.35) didn’t have the banner day as the October calls did but still were up 60% for the day.

There were a slew of other good trades, too many more for me to list but you got the idea. Keep an eye on some of the calls I have mentioned. They may get cheaper and they may not. It’s too early to call this a rebound and there is no way of predicting where we are headed over the next few days. Remember, earnings are on tap and they will certainly sway the market.

Rick Rouse
Rick@OptionsMentoring.com

Words can’t describe the excitement we’ve seen in the market over the past few weeks and Friday was a classic example of what could be described as “running for the hills”. Wall Street was in full fledged panic mode Friday as the Dow went back and forth in a 1,000-point range, hitting a low of 7,882 and a high of 8,901.

The last hour of trading was a toe-to-toe battle between the bulls and the bears that left both sides bloody. It was awesome. By the final bell the market had mixed results as the Dow fell 128 points to 8,451, while the S&P 500 slipped 11 points to 899. The Nasdaq held its own and managed to finish in the green, up 4 points to 1,649.

The final score for the week was a clear victory for the bears, however, as they hit the Dow and S&P 500 for 18%, while the Nasdaq slid 15%.

As a result, a lot of companies went on sale, at least in my mind. More on that in a minute. While it is extremely hard to predict a market bottom, there are signs that at least we are getting close. I still don’t trust October but as bad as the month has been historically, it is often the best time to buy when looking at long-term stocks or options if there has been a correction.

Yeap, it’s gonna be hard to go long right now, but with a game plan you can advantage of everyone’s elses fear. Take a look at how some of these big names traded on Friday.

Microsoft (MSFT, $21.50, down $0.80) hit a low of $20.65. Are you kidding me? Back in April when Microsoft was trading at $30 did you ever think you would have the chance to buy it at $20?

Back in May, Google (GOOG, $332.00, up $3.02) was at $600. Yesterday it traded as low as $310. At half-price, is it a Blue-light special?

How stupid does Yahoo (YHOO, $12.29, down $0.36) look now for not taking Microsoft’s $30+ a share offer? Yahoo may not be worth $30 but it does look cheap at $12.

Johnson & Johnson (JNJ, $55.85, down $1.73) was at a 52-week high less than a month ago and hit a 52-week low of $52. Crazy. Just crazy, man.

General Motors (GM, $4.89, up $0.13) got chopped in half after after Standard & Poor’s Ratings Services said the company’s credit could drop further.

Energy companies have taken a whippin’ as oil prices fell 10% to a 13-month low of $78 a barrel. That’s the lowest its been in a year. Gas is going for $2.99 a gallon here on the east coast. Remember our Energy Watch list from June?

Arch Coal (ACI, $22.04, up $0.49) was at $70.

Massey Energy (MEE, $20.73, down $1.15) was at $84.

Patriot Coal (PCX, $14.60, down $0.23) was at $154. There was a 2-for-1 stock-split in August at $100. Still, the shares have fallen from $154 to $28 ($14 split-adjusted)? Incredible.

Peabody Energy (BTU, $28.65, down $0.93) was $77.

Joy Global (JOYG, $28.88, down $2.09) was at $85.

I profiled quite a few of them on June 4 and two weeks later they had returns of 100%-300% as the call options exploded when the stocks were hitting new 52-week highs. Click here to view these blogs.

The VIX (^VIX, 69.95, up 6.03) blasted through the 60’s and nearly hit 77. On Tuesday, the VIX was at 52 when I said that the 60’s look like a good bet.

The point I’m trying to make is that some stocks ran too high too fast and now some of them have gone too far to the downside. Somewhere in the middle is where they may be fairly valued but we are more worried about the options on these stocks, not the funadamentals. I still don’t trust the financial stocks but there will be some winners out there once the dust settles.

The credit crunch, President Bush, the press and the talking heads have scared the be-Jesus out of everybody and nothing seems to be working to restore faith in the market. Remember what I have said about not following the herd. Yes, the market is tanking and there’s more downside risk. But everybody needs to quit beating the horse. It’s already dead. Now is the time to start buying for 6-12 months down the road.

I’m working on a “Lottery Portfolio” this weekend and I will be picking some stocks and sectors that may be worth a gamble. The market is open for business on Columbus Day although banks will be closed. Right now Wall Street can’t see the forest for the trees and hopefully by doing a Lottery Portfolio, I will be able to show you the bigger picture.

Rick Rouse
Rick@OptionsMentoring.com