Thursday’s Levels
Wednesday Recap: We had a good
day Wednesday with a profit of $170.
In our prediction for Wednesday, we said the
markets were likely to move higher. Further, we predicted that there was
approximately a 65% chance that 1125 would be broken on the S+P.  While we
predicted higher price action, the S+P started the morning with a negative tone,
with the S+P under water for much of the morning while the Dow hugged the flat
line for much of the morning and the NASDAQ was significantly under water for
much of the day. Then in the afternoon, the market climbed into the black with
the S+P ultimately piercing the 1125 level and the Dow busting above its 50-day
moving average, closing above4 10250. You will recall for the past week we have
been predicting a touch of 10250 on the Dow. Near the close of trading the
markets came back down to test the breakout points and nominally held, with the
cash S+P finishing at 1124.99 and the market’s measure closing at 10263.Â
However, before we break out the party balloons the NAS failed to catch a bid
and closed down some 1.8 points on the day — the worst performing index.Â
^next^
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Prediction for Thursday:Â The big question to be answered is,
Was Wednesday’s move above resistance a head fake to bring in bulls and close
out shorts or was it a significant event that will likely trigger a move to
higher levels?
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The
bull case for higher price action is likely to be put to the test early Thursday
at the open. Early in the trading session I expect the cash markets to move
down and test support. If the markets hold a bearish tone throughout the day
and close under key support, we could remain in our trading range. However, if
the markets hold yesterday’s breakout points — 1125 on the S+P and the 50-day MA
on the Dow — then we could catch a bid that takes this market near the yearly
highs.Â
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On
the cash Dow On the cash S+P we’ll watch for an early test of the 1122 level,
then a more significant test of chart support and the 50-day MA which currently
resides at 1117.50. On the cash Dow we’ll watch for a test of 10200, then if
the market gets negative we’ll watch for a potential gap fill and a move to the
20-day EMA. We’ll also keep an eye on the NAS. If the NAS once again
underperforms the market it will be a sign of overall weakness.Â
Portfolio Strategy:Â Â
We’re delta positive right now. Depending on how this market reacts to support
we might get closer to neutral.
Previous Trading
Day’s Results and Current Portfolio Status
Daily Profit: $170
Â
10100 June Mini Dow Put Option: We are short one put option. Yesterday it
closed at 60, down 30. Profit yesteFrday with this position was $150.
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9700 June Mini Dow Put Options: We are short one put option. Yesterday this
option closed at 15, down 9. Loss yesterday with this position was $45.
10600 June Mini Dow Call
Option: We are short one call option. Yesterday it closed at 12, up 5. Loss
yesterday with this position was $25.
Mini Dow Futures: We came
into the day flat the mini Dow future.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.
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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.