Short-Term Index Trades

the coming weeks I’ll show you my system for short selling options and then

directionally trading futures within this short options position.  We’ll take

a look at my daily support and resistance numbers as well as my intraday

pivots.  This system has proven both profitable and consistent, and I hope you

Friday Recap: We had a good week last week with a profit on our options

portfolio of $530.

In our prediction for Friday, we mentioned that a break of the 10250 level in

the cash Dow would start to show signs of weakness.  Further, we indicated

that a move below 10200 would provide a negative set-up for the market next

week, and in fact we covered some of our short put options at the end of the

day Friday.

In fact on Friday the cash Dow and S+P started the day higher, with the Dow

testing what has become formidable resistance just 10215.  Yet while the Dow

was testing resistance, the S+P did not confirm, having not reached its

intraday pivot resistance at 1126.  This provided clues that the test of

intraday resistance on the Dow might fail, which it did.  The Dow and S+P then

moved lower, the Dow testing our predicted pivot of 10250 and the S+P testing

just below 1117.  From here, the indices bounced and stair-stepped higher to

re-test and ultimately fail at intraday resistance.  The indices then tried

and failed to rally, this time coming back to test pivot support for the third

time, and this time the market moved down rather quickly through this support,

then pausing near 10240 on the Dow, 10225, breaking 10200 and finally closing

10186, down 109 on the day.  The S+P closed at 1109.78, down 12.54 on the

day.   

   

The market is going to start by testing significant support, and how
it reacts at this

point could define the near-term direction.

On the cash S+P we will watch an initial test of pivot support in the 1102-03

level.  On the cash Dow we will watch the 10100 level.  If the indices break

and hold under these pivots, we’re likely to move lower and define the near-

term trend of the market lower. However, if we bounce from these levels we

If the cash Dow moves under 10100 and holds, we

are going to start to get delta neutral. 

Power Pivot Strategy

Dow: Our main pivot on the Dow is going to be 10100 on the cash.  Let’s set up

a buy near resistance, set your initial stop at 50%, 7 points from execution. 

Set your trailing stop at 50% 17 points from execution.  Set your profit

targets as follows: 25% scalp 5 points from execution.  Set your mid-point

target at 75% and set at cash equal to 10196.   

Good trading,