Here Are Three Positive Signs For Longs
Friday Recap: Our prediction
posted before the cash open Friday said the cash Dow would come down and test
the 10250 level and then bounce. On Friday the Dow got close to fulfilling
the first half of our prediction – as the Dow ended the day at 10260, down some
30 points on the day. While the Dow closed lower, it didn’t always look
that way, as the cash Dow sprinted to an early test of chart resistance near the
10330 level, then sold off and traded in a coil fashion for most of the day
before ending near the lows of the day. The first half of our prediction
was fulfilled Friday, the second half – the bounce – is likely to occur today. Â
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Prediction for Tuesday. On Friday the cash Dow essentially hit the first
part of our target, and on Tuesday we will likely see a bounce. The
initial level to watch on the upside is 10330. If this is broken and
holds, it will be followed by 10400. Ultimately I am expecting a test of
10500-50, the question is: when will that happen? If we get a quick test of
10550, that would clearly represent a short-term selling opportunity. On
the downside, for the cash Dow we’ll watch 10250-10200 support, followed by
moving average support at the 200-day and 50-day simple moving averages, then
again the 20-day EMA.Â
In order to identify mid- to longer-term trends,
it is often instructive to examine the weekly charts. In particular, I
like watching the broad-based S+P to get a sense of the market. As you can
see on the S+P chart, the RSI is moving above 50 and could be headed towards 70,
the MACD is setting up for a buy signal and we just had a positive SAR trend
change for market bulls. Couple that with the fact that the daily S+P is
trading above its 200-day moving average, and we could start to see piles of
institutional cash find its way into play on the buy side.Â
In certain quarters on Wall Street there is a lot
being made of the seasonality of the market and the fact that September is
historically the worst performing month of the year for stocks. While that
is statistically true for most Septembers, it is important to note that during
an election cycle September isn’t quite as nasty for stocks – in fact it is
quite mild. So long as we don’t see any unexpected surprises in September,
I expect the market to climb a wall of worry and end the month higher than it
started.
Portfolio Strategy:Â Right now we are
significantly delta positive. We’re likely to remain positive.Â
However, if the market reaches 10400 today we might get a little negative.Â
Daily Loss: $245
10100 Sept. Mini Dow Call Options
Long 5.
Yesterday these options settled at 205, down 30.Â
Loss yesterday on this position was $750.
These options expire September 17.
10300 Oct. Mini Dow Call Options
Short 5.Â
Yesterday these options settled at 145, down 18
Profit yesterday with this position was $450
These options expire October 15
10400 Oct Mini Dow Call Options
Short 1.Â
Yesterday these options settled at 100, down 11
Profit yesterday with this position was $55
These options expire October 15
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Charts from www.stockcharts.com
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Past performance is not necessarily indicative of future results.
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