Stocks tumbled for their third straight session. Investors, analysts and commentators are getting frustrated with Ben Bernanke's persistent ramblings on inflation. Transparency is a great concept, but it can be "abused".

Given the recent volatility in the marketplace, it would seem as though there has been a massive amount of new information hitting the market place. This is not the case. In fact, there has been very little economic or corporate news out to drive the financial markets. The violent swings have been sparked by comments made regarding information that is already public and priced into the market.

PE ratios of the S&P are trading near 10-year lows, while the S&P is still trading at relatively high levels. This can only mean one thing...the market is currently undervalued. If you have enough guts to get in, this is a great buying opportunity.

Helpful Hints:

The "summer rally" is typically not much of a rally at all. According to the Stock Trader's Almanac, the week after the June Triple-Witching the Dow has been down 14 of the last 16. June normally sees less than modest gains in the broad market, but the NASDAQ has performed slightly better averaging 1.6%. June ends the NASDAQ's best months.

We will be rolling over next week.

 
Dow Recommendations
Swing Trade - Safely on the sidelines.

Position Traders - We sold the June 107 puts for $500.

Option Traders - On 5/2/06 we put on a bear put spread with a naked leg. We bought the 114 put, sold the 112 put and the 116 call. The trade cost us about $100, the max payout is $2000, and the margin is about $3800.

Some of our clients liquidated the long 114 put on 5/15, we have since bought back the 116 call for a nice profit and are holding the short 112 put.