Thursday’s Levels
Wednesday Recap: There In our
prediction for Wednesday, we said the markets would retrace lower. That
occurred, as all major indices ended lower. The trading day started gap down
and then a somewhat orderly intraday down channel in the morning. Around lunch
in New York, bulls tried to rally but failed at intraday declining moving
average resistance. That failure accelerated the decline into the afternoon,
when the indices retested important short-term support near the 40-day moving
average on the hourly charts.  While this support did provide a small bounce,
bulls were unable to break the intraday declining tops and moving average
resistance. This took the markets lower to move to close near their lows on the
day. On the day the Dow was down 64, the S+P down 10.85 and importantly the
NASDAQ — the worst performing major index of the day — was down 32.92.
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You will recall that in yesterday’s prediction we said we expected a move higher
in volatility. That occurred, as you can see the exact chart posted yesterday
morning with the only addition yesterday’s closing price action. When
volatility gets low it is a sign that the market may be ready for a breather.Â
^next^
Prediction for Thursday:Â I
expect that we’ll try and move higher on Thursday and test resistance. If the
markets can break through resistance, we could get some legs higher. If not we
could look to test important support. On the cash S+P we’ll watch for a test of
the 1140 level. If the S+P can get above and hold 1145 we could ultimately head
to 1150. If resistance can’t clear, we’ll watch for a test of support. On the
cash Dow we could come down and test 10350, 10300 and then important support
near the 50-day moving average, currently at 10265.
Portfolio Strategy:Â With
inflation numbers being released on Tuesday, we’re might start to position our
July options portfolio today.Â
Previous Day’s Results and Current
Portfolio Status:Â Â
Daily Profit: $30
Â
10100 June Mini Dow Put Option: We are short one put option. Yesterday it
closed at 15, up 3. Loss yesterday with this position was $15.
Â
9700 June Mini Dow Put Options: On 5/24/04 we sold one put option for 70.Â
Yesterday it closed at 4, up 1. Loss yesterday with this position was $5.
10600 June Mini Dow Call Option: We are short one
call option. Yesterday it closed at 3, down 10. Profit yesterday with this
position was $50.
Mini Dow Futures: We came into the day flat the
mini Dow future and remain flat the mini Dow.Â
Charts from www.stockcharts.com
For questions e-mail,
subscriptions@dowoptionstrader.com
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.
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.