Thursday’s Levels
Wednesday Recap: Wednesday was
one of the wildest days I’ve seen in a while. It was sort of like teenagers who
break into an automotive compound and take the car keys to play demolition
derby.Â
The market started by gapping down at the open
and then dropped in an orderly fashion until the cash Dow hit 9900. From there,
it bounced until sellers took her down to new lows for the day under technical
support at 9900. But it then bounced to test 9900, failed and then made lower
lows, touching a daily low at 9850. At that point the charts looked uuuuugly.Â
But then just as quickly as the markets moved lower, they bounced squeezing any
shorts of what life they had left in them, and the Dow finished near 10050
resistance we had been watching.Â
The key to the turnaround was the S+P, which
essentially ignited buying when the broad-based index tested its 200-day moving
average. When this test was successful, the oversold market found new buyers
and then shorts got nervous towards the end of the day and propelled the index
to end its close to 20 point journey from top to bottom, closing at 1097, up
1.83 points.
^next^
Prediction for Thursday:Â The
pre-open Dow futures are trading near 10000, so we’re likely to start the day
with a negative bias. However, I think that we’re going to move both above and
below this level. Today’s inflation numbers didn’t really provide any
direction. On the upside if we can get ahead of 10050 we could start to take off
to the upside and ultimately challenge 10170. On the downside, we’ll continue
to watch the 9950 and 9900 levels. If we break this level, let’s keep an eye on
the S+P when it reaches its 200-day moving average. If the S+P moves below and
holds under this level it would be significantly negative for the market.Â
Portfolio Strategy: Right now we
are very close to neutral, slightly negative. We’re going to stay close to
neutral until the market shows us a clear direction.Â
Yesterday’s Results and Current Portfolio
Status:Â Â
Daily Loss: $1,375
Â
10100 May Mini Dow Put Options: We are short 2 put options. Yesterday we bought
two mini Dow options for 163. Profit yesterday with this position was $120.Â
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 2, 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 24, up 4. Loss yesterday with this position was $40.
Mini Dow Futures: We came into the day short two
mini Dow futures. We sold one mini Dow at 9872 and sold another at 9861 and we
bought two back at 10018. Yesterday it settled at 10053, up 68. Loss yesterday
on this position was $1,855. 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.
Â
For questions and comments send an e-mail to
subscriptions@dowoptionstrader.com
DISCLAIMER:
Past performance is not necessarily indicative of future results.
There is a substantial risk of loss in commodity futures and options
trading. It is not suitable for all investors. Only you can determine
whether this trading suits your particular needs and risk tolerance.
All profit and loss representations are hypothetical and based on the real
time signals generated by The Dow Trader. The results have not been
adjusted to reflect slippage or commission charges. No representation is
being made that any account will or is likely to achieve profits or losses
similar to those shown.