Here’s Why Today Could Be Significant

  • September 10, 2004
  • Mark Melin

Thursday Recap: In
our prediction for Thursday, we said the markets would touch both sides of the
flat line with an upside bias.  In
fact the major indices touched both sides of the flat line and both the NASDAQ
and the S+P ended with an upside bias.  Unfortunately,
the cash Dow was the party pooper.  After
starting the morning higher, the Dow took a quick turn lower and tested its
200-day moving average.  After both
the Dow and S+P successfully tested their respective moving average support, the
Dow bounced and traded in a coil fashion for the balance of the day, ending down
some 24 points at 10289.



We
mentioned that the NASDAQ ended the day higher, and in fact the market
bellwether impressively closed just above its 50-day moving average,
successfully tested SAR and RSI support on stiff volume. 
Likewise, the NASDAQ 100 tested support and ended the day with a little better
distance above its 50-day moving average. That’s significant, and if we
can hold the 50-day we could see a sprint higher on Friday — which will be a
significant day for the markets. 



Prediction
for Friday:  We could have a
significant day Friday, one that could define the trend of the market for the
next few weeks.  Ultimately I think we head
higher.  In particular I’m going to watch the tech indices to see
if they not only hold their moving average support, but also if they can break
into new highs.  On the NASDAQ 100,
I would like to see a break and hold of the 1403 level. If this happens, I think
the cash Dow will challenge 10400.  However,
if the market can’t find traction we could see a test and potential break of
the 200-day moving average on the cash Dow — and this could lead us into a
downleg. Also keep an eye on interest
rates.  You’ll note that in yesterday’s report we pointed out Chicago
traders said that a September rate hike might be the last hike in this run,
after that the Fed may pause for some time. With low inflation numbers released
Friday morning, that buzz will continue to grow.



Portfolio
Strategy:  Right now we are delta
positive.  Regardless of the price
action today we’re likely to take a little off the table and get the portfolio
a little closer to neutral.  If the
Dow breaks and holds under its 200-day moving average we’ll potentially get
negative towards the end of the day. 

Delta: +146.9

Theta: -51.17

Maintenance Margin: $4,878 (May vary from broker to broker.)

Previous Day’s
Results and Current Portfolio Status: 

Daily Loss: $240

10100 Sept. Mini Dow Call Options

Long 5. 

Yesterday these options settled at 199, down 41. 

Loss yesterday on this position was $1,025.

These options expire September 17.

10300 Oct. Mini Dow Call
Options

Short 5. 

Yesterday these options settled at 140, down 27.

Profit yesterday with this position was $675

These options expire October 15

10400 Oct Mini Dow Call
Options

Short 1. 

Yesterday these options settled at 92, down 22

Profit yesterday with this position was $110

These options expire October 15