Friday’s Levels
Tuesday Recap: After release of
Thursday’s somewhat inconclusive inflation numbers, the day started out with a
move down to 9975. After that it went back and forth for much of the morning,
then just before lunch found support, bounced higher and made the session highs
just around the lunch hour – just over 10050 in the cash Dow. The market
couldn’t hold this level and went into a steady, orderly decline in a 3-leg down
move, holding the morning reaction lows which resulted in a late afternoon rally
back to test resistance at the end of the day. When they couldn’t get through,
they backed off a bit.
The S+P pretty much had the same pattern as the
Dow Thursday. It pretty much stayed in a predictable range of support and
resistance and created a candlestick that highlights the market’s indecision.Â
^next^
Prediction for Friday: The CPI inflation numbers came out, and the core
rate was unusually higher than the headline number??? The much anticipated
inflation numbers have left the markets scratching their heads and looking for
direction. Right now Dow futures are trading near 9940. I again expect a move
both above and below this level. If the S+P moves down to test the 200-day
moving average, this could potentially offer a buy opportunity for the entire
market – if we get that low today. On the cash Dow we’ll watch the 9950, 9900
and 9850 level. On the upside, we’ll keep an eye on the 200-day MA on a closing
basis. We could gravitate towards this level near the end of the day. Further,
we’ll keep an eye on 10050, then again 10170.Â
Portfolio Strategy: Right now we
are close to delta neutral. Until we see a clear trend that’s how we’ll keep
the portfolio.
Yesterday’s Results and Current Portfolio
Status:Â Â
Daily Profit: $90
Â
10100 June Mini Dow Put Option: We are short 2
put options. Yesterday it closed at 225, down 39. Profit yesterday with this
position was $390.
Â
10600 May Mini Dow Call Options: We are short 2 put options. Yesterday this
option settled at 1, down 1. Profit yesterday with this position was $10.Â
Â
10600 June Mini Dow Call Option: We are short two call options. Yesterday it
closed at 16, down 8. Profit yesterday with this position was $90.
Mini Dow Futures: We came into the day short one
mini Dow future. Yesterday it settled at 9983, down 70. Profit yesterday on
this position was $350.Â
We are short one mini-Dow.Â
Trading Method:Â 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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