Wednesday’s Levels

  • May 26, 2004
  • Mark Melin

Tuesday Recap: In the face of
lower pre-open indicators, our prediction for Tuesday said the markets would
start lower, find support and then move higher.  The prediction chart from
Tuesday morning is posted below, and you can see the cash Dow found support near
9930 and then bounced higher, first clearing 10000 then testing, clearing and
holding important chart resistance at 10050 and the 200-day moving average.  On
the day the Dow closed up a stiff 159 points. 

Also notable yesterday was the fact that the NASDAQ cleared its 200-day MA
and is now within striking distance of its 50-day MA, and the S+P cleared
important resistance near 1102-05.  Overall a stiff tone to the market.  The
question is, will we get follow-thru?

 

^next^

Prediction for Wednesday:  The market could touch both sides
of the flat line Wednesday and potentially move to test the previous breakout
points.  Ultimately I expect a potential firming going into the weekend. 
perhaps the most interesting upside test could occur on the NASDAQ when it
reaches the 50-day MA near 1971.  If the NAS can’t clear and hold this level it
could de-rail this market drive higher.  On the downside for the NAS we’ll watch
for a potential test of the 200-day MA near 1952.  On the upside for the cash
Dow we’ll watch the 10170 level, then our target in the 10200-50 level. On the
downside, we’ll watch for a test of the 10050 level — which might be a good
spot to buy.  On the upside with the S+P we’ll watch the 50-day MA near 1116 and
then again the 1125 level and the upper Bollinger band trading range.  On the
downside we’ll watch for a test of 1102-05.

Portfolio Strategy:  We are currently delta positive.  We’ll
remain delta positive until the end of this week, and in fact we might get
additionally

Yesterday’s Results and Current Portfolio Status:  

Daily Profit: $85

 

10100 June Mini Dow Put Option:  We are short one put option.  Yesterday it
closed at 130, down 100.  Profit yesterday with this position was $500.

 

9700 June Mini Dow Put Options: On 5/24/04 we sold one put option for 70. 
Yesterday this option closed at 32, down 45.  Profit yesterday with this
position was $225.

10600 June Mini Dow Call Option: We are short one call option.  Yesterday it
closed at 5, unchanged.  Profit yesterday with this position was $0.

Mini Dow Futures: We came into the day short one mini Dow future.  We bought
that future Tuesday for 10098.  Loss on this position was $640.  We are flat the
mini-Dow. 

Trading Method:  Mark Melin strategically short sells options and then
directionally trades within this short options portfolio, always hedging one
position against another to generate consistent profits.

 

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