I’ve also been watching the S&P 500, waiting for it to give me some confirmation. I think that if we can settle above 1281 on a weekly basis (that’s on the March futures contract folks, not the cash) then we are technically breaking out. That’s when I think the nonbelievers will rush in and start chasing. And that’s when yours truly will start selling it to them. I might miss the top, but no one ever went broke taking profits.

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If you’re trading grains (specifically corn) and missed today’s show, you’re going to want to download the podcast to hear Howard Marella of Index Futures Group talk about the trade he’s got on, plus what he thinks is on the horizon for the commodities markets over the next few months. Wonderful stuff!

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Politics aside, the question on investors’ minds is: What do these jobs numbers mean for the markets?

Right now, there are a lot of portfolio managers who were pleased to see the ADP number reverse an overnight market that was down based on, you guessed it, news from Europe. So now they’re waiting to see what happens with non-farms before they make their move. If the numbers come in anywhere at or above expectations, I think we’ll see the markets react very well.

What we don’t want to see tomorrow is a market that opens the day higher and then breaks. That means portfolio managers are buying the rumor and selling the news. Pay attention to what happens after the announcement tomorrow—if we’re able to continue to grind higher throughout the course of the day, that’s a sign of real strength.

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As a long-term gold bull, I was very eager to take advantage of that pullback and get into a long position. So I brought Greg Hadley of Bull & Bear Institute on the show. Greg walked us through a wonderful high-probability trade—a 15-16-17 fly—that turned out to be a real winner.

So now that we’re in the money, I asked Greg back on this morning to find out what he’s doing next.

Like me, Greg still maintains his upward bias. And he still has a lot of upside wiggle room in that trade. Since he doubled up on his initial position (long two 1500s, short four 1600s and long two 1700s—all calls), he’s taking half off while the shorts are in the sweet spot. That will give him around a 4-1 return—enough to pay for this trade and the next one too. Meanwhile, he’s holding on to the other half of his position, looking for a chance to make even more money down the road—remember, we’re talking about April strikes here.

Every once in a while you have to pat yourself on your back when you make a great trade, and, like I told Greg, this is absolutely one of those times. A brilliant high-probability trade where we always know our exact risk-reward ratio—and the timing couldn’t have been better. This gold trade is just another in the long list of reasons why I’m so glad I came across the Bull & Bear Institute. I aim to be a good steward of information, and they bring that same philosophy to each and every one of their classes. Heck, I’ve been in the markets nearly 30 years and I’m still learning things from them!

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Housing. Remember that just a few years ago housing was 6% of GDP; today it’s 2%.  I believe that we’re finally bottoming out, and I’m anticipating that the housing market will start to creep back up in 2012. Of course, that’s only if—and this is a big if—we can get the banks to start appraising properties the right way and begin to lend again. Keep in mind that a move in housing will also move things like copper, lumber and other commodities.

Manufacturing. Look at the oil-service supply sector, which is building the pipelines that will move all that oil from the Bakken oil fields in North Dakota to the refineries across the country. Or the auto industry, which is again showing signs of life and coming off its best December in five years. We’re building things in this country again, and that is important for investors to keep an eye on as they look ahead to the new year. Like housing, manufacturing is will also have an impact on commodity prices—be sure and watch for these correlations as well.

Financials. The financial sector is undervalued, but it’s probably a lot healthier than most people think. Take Bank of America. They have enough money to pay back every loan they have on the books with plenty to spare, yet they’re trading under $6. Everyone wants to compare our banks with Europe’s, but I’m here to tell you that it’s apples and oranges. I’m looking at some individual banks, but I think the real value play is the XLF, an ETF that offers wide exposure to financials. (I don’t steer clear of all ETFs—just the ones that track commodities and indices!)

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Once again, gold is the big story. We’re seeing a fairly dramatic end-of-year liquidation, and it’s retraced so much that we’re almost entering bear market territory. I’m calling this the beginning of a bear trap: the trend followers are no longer getting long and are starting to get short—which in my mind is a buying opportunity waiting to happen. The question is, When do we pull the trigger? And how?

As you’ll recall, a few weeks ago we brought in Greg Hadley of Bull & Bear Institute in to give us an options strategy for long exposure to gold. He walked us through the Condor. This type of trade is great for when you have a strong opinion of where the market could go, but also like to have some wiggle room and get a high risk-reward ratio.

We’re about $70 lower in gold than we were then, but I still have a long-term upside bias. Of course, I’m also realistic about where we could dip in the meantime.  I believe it could see gold prices fall into the 1400s before it settles and starts to percolate back up. So I asked Greg to come in again this morning to give us another strategy for long exposure after the basing action takes place. As he always—and just like when he was trading for Warburg and Solomon Brothers—he came through with a wonderful play.

It’s the Simple Butterfly using calls: long the 1500, short the 1600 twice, long the 1700. As the market moves up, it goes past the long strike and moves toward the short strike. If it lands anywhere in the middle of that range we’re in terrific shape, and Nirvana would be right at that 1600 strike. I love it! And folks, anyone can put on a position like this—you just have to learn how to do it the right way.

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As I’m watching gold correct, I’m also keeping one eye on copper. The fact that it’s not moving with gold or silver and staying right around the 3.3 level is key. Why? Because it’s the metal of choice for the high-tech world. And when copper’s doing what it’s doing relative to other metals—i.e., not liquidating—that tells me there’s an underlying demand on the tech side. When this type correlation happens, it often translates to higher NASDAQ prices over the course of the next few months. Let’s see if it holds true in this case.

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Bing was a storehouse of information, showing me how institutional traders think and act and what strategies were driving daily volatility. One of the Bingisms I remember is: “There are over 2,000 rules in the book of trading [an imaginary book he thought up] and over the course of my career, I’ve only learned 20.”

This was a brilliant man, folks, and I imagine that if near the end of his life someone had asked how many of those 2,000 rules he’d figured out he’d still have said no more than 50. But regardless of the number, the point is the same: the learning never stops. And learning lessons in the market and not using those lessons to become a better trader is a waste of energy, and even worse, money.

How do you try to find the full score? How do you do your homework in an environment where the market information may not be transparent?

These are the questions that all new traders should be asking if they regard trading as serious business rather than a passing hobby. New traders are sometimes so enamored of charts and technical indicators that they neglect to study the real foundation of the price movements. This is where access to a proper information network is vital, and it’s likewise vital to keep your eyes and ears open at all times. In fact, I think the best traders are those who hear and see everything around them, then refine and synthesize it into a trade.

No one will ever learn all 2,000 rules of trading. And not everyone can be so lucky as to learn from a giant of a mind like Bing. But thankfully, that proper information network that is so important to traders can still be found—take the excellent curriculum and educators at Bull & Bear Institute. They understand, like Bing did, the lessons that separate the good traders from great ones.

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