Here’s Why Yesterday’s Action Was Positive For The Market

You
will recall in yesterday’s morning report we clearly said that oil would start
to trade lower. 
This follows up
comments made earlier in the week regarding a tremendous amount of terrorism
premium in the price of oil.  Yesterday
it started to drop, ending the day at $46.05 per barrel. 
I’ve posted the exact oil chart we published yesterday morning, with
the only addition being yesterday’s price action. 

While
oil prices fell, you would think that would have a positive impact on stocks. 
While the market leading NASDAQ rose, the Dow sank, tesing support near
the previously identified intraday support on the chart above, but then bouncing
to close higher.   While on the
surface a drop in the cash Dow might seem like a negative, in fact I view
yesterday’s market action as somewhat positive on a short term basis. 
The fact that the cash Dow held previously identified light intraday
support — and the NAS actually moved higher were in fact positives for this
market. 

Prediction
for Tuesday:  The cash Dow could
test our target region either today or on Wednesday.  
That region is likely to fall the vicinity of B on the chart below. 
When we reach this level, we might change from a delta positive stance to
a more negative to neutral stance, looking for a pull back from these levels.  

Portfolio
Strategy:  Watch for a potential
trade today or on Wednesday to get the portfolio a little closer to
negative/neutral. 

Previous
Day’s Results and Current Portfolio Status: 

Daily Profit: $210

10100 Sept. Mini Dow Call Options

Long 5. 

Yesterday these options closed at 125, down 30. 

Loss yesterday on this position was $750.

These options expire September 17.

10300 Sept. Mini Dow Call Options

Short 8. 

Yesterday these options closed at 40, down 24. 

Profit yesterday with this position was $960.

These options expire September 17.

Charts from www.stockcharts.com

For questions e-mail, subscriptions@dowoptionstrader.com

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.