Tuesday’s Levels
Monday Recap: In our prediction
for Monday, we said that the S+P would test its 200-day moving average and that
would hold sway for the market. That occurred, as the S+P once again
successfully tested its 200-day MA and bounced to end the day at 1084.10, down
some 11.60. Â
The markets started the day on the back of some
bad international news that took trading into a much lower range right out of
the gate. The cash Dow quickly started lower and tested the 9900 level, where
it briefly consolidated before moving lower with the S+P. As the S+P was
testing its 200-day MA the Dow was at 9860 – and making the low of the day.Â
When the S+P held the 200-day MA, all markets bounced and the Dow tested the
9950 level. For the balance of the day the Dow traded in a consolidative range
and ended above 9900, closing close to 9907. Â
                           Â
Charts from www.stockcharts.com
^next^
Prediction for Tuesday:Â Having
the S+P successfully test the 200-day MA on several occasions could propel this
market higher. Many of the near term indicators are getting ready to flash buy
signals. On the S+P chart, you’ll note that the MACD could roll over and flash
a buy signal that would likely be confirmed by RSI and Stochastics. On the S+P
we’ll watch for a test just above the 1100 level. On the cash Dow we’re going
to watch for a test of the 10050 level. This has been broken in the past, but
it never held for more than 5-10 minutes. If this breaks and holds, we could
then move to the 10250 level. Â
I think the most significant upside test is going
to come with the NASDAQ. Like the S+P on the downside, when the NAS tests its
200-day MA it could hold sway for the whole market. Initially, I expect the gap
that was created on Monday to be filled. Potentially over the next few days or
before the May options expire I then expect move to the 200-day MA. Ultimately
I’m not really bullish on the NAS breaking its 200-day MA – and this may provide
a selling opportunity for the entire market. Â
If the market doesn’t get some legs and test
higher levels on a sustained basis, we could once again test the 200-day MA on
the S+P – and if this happens the chances of a break and move lower in the
entire market is more likely.   Â
Portfolio Strategy:Â Right now
we are delta positive. We will remain positive until we reach 10050. If we
clear that level we’ll remain positive until the 10250 level or when the NAS
tests the 200-day MA. Â
Yesterday’s Results and Current Portfolio Status:Â Â
Daily Loss: $35
Â
10100 June Mini Dow Put Option: We are short 2 put options. Yesterday it
closed at 295, up 50. Loss yesterday with this position was $500.
Â
10600 May Mini Dow Call Options: We are short 2 put options. Yesterday this
option settled at 1, unchanged. Profit yesterday with this position was $0.Â
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10600 June Mini Dow Call Option: We are short two call options. Yesterday it
closed at 10, down 5. Profit yesterday with this position was $50.
Mini Dow Futures: We came into the day short one mini Dow future. Yesterday
it settled at 9914, down 83. Profit yesterday on this position was $415. We
are short one mini-Dow. Â
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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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