Today On The Price Channel

Turn on the Price Channel and you'll see this. Much better than watching the back and forth, on and off Fiscal Cliff nonsensical drama. It's also a much better way to block out the noise and focus.

And here is where my focus lies this morning: 1416.57. I hedged some SPY 144 puts yesterday with e-minis, and this is where I'll either dump the e-mini hedge or not. Notice this is the cash number and not the ES contract. I take my levels from the cash index because it's not pushed around by leverage or by cowboys trying to gun for stops which distorts the chart.

The large afternoon upthrust took a lot of the loss out of the SPY 144 calls that I am also holding. My play is simple moving forward: I will continue to use e-minis to hedge the puts while letting the calls collapse. A couple points past the afternoon upthrust and they'll be "neutralized."

I still see many paths that the market can take. A bounce to 1430 could "come from nowhere." Or the trend channel could break and 1400 or 1380 could be tested quite fast. Options give flexibility to test for reversal points with a minimum of risk, and with the VIX low, it's a great time to utilize them while the inmates are running the asylum.