Tuesday’s Levels
Weekend Report, July 5
Friday Recap: In Friday
morning’s prediction, we said that interest rates would continue to move lower.Â
In fact on Friday, interest rates once again moved lower, but this didn’t help
stocks. While the 10-year note continued to fall, closing at 4.45%, stocks
found little comfort in lower rates and instead focused on the resulting
concerns over the economy. On the cash Dow, the market started lower, touched
the 10270 level before bouncing to 10320. From here the Dow stair-stepped lower
to hit the 10270 level around lunchtime, then traded in a coil fashion for the
balance of the day, closing at 10282, down 51 on the day.Â
^next^
Prediction for Tuesday:Â We’re
likely to start the day by testing the 50-day moving averages on the major
indices, but ultimately if these levels hold we could bounce from these levels
and even touch the upside before the day is over.  We’re approaching earnings
season, and positive earnings news could cheer the street. Also, as was
mentioned in the New York Times this weekend, many are anticipating the news
from Iraq to consistently improve as we approach the presidential election. All
these factors bode well for stocks over the next month or two. Â
On the cash Dow we’ll watch for an early morning
test of 10250. If we get a bounce on Tuesday, we’ll watch for a move to the
10320 level, but a break and hold under 10250 may take us to the 10170 level.Â
On the cash S+P we’ll watch for a test just below
the 1120 level. If we get a bounce, we’ll watch for a test of the 1130 level,
but 1120 breaks and holds we’ll then watch for a move to 1100.Â
On the NASDAQ, we’ll watch for a test of 1979 to
1973. If we get a bounce it could take the market to 2000, but if we move and
hold under 1973 we could move to 1960.Â
Portfolio Strategy:Â Right now
we are slightly delta positive. If the market breaks 10250 we’ll likely get
negative.Â
Previous Day’s Results and Current
Portfolio Status:Â Â
Daily Loss: $160
9900 July Mini Dow Put Options
Long 4
Yesterday it closed at 17, up 2.Â
Profit yesterday with this position was $40.
10300 July Mini Dow Put Options
Short 5.Â
Yesterday it closed at 115, up 10.Â
Loss yesterday with this position was $250.
10600 July Mini Dow Call Options
Short 1
Yesterday it closed at 7, down 5.Â
Profit yesterday with this position was $25.
We are now short one optionÂ
Mini Dow Futures
Short 1 Sept mini Dow futures
On Friday we sold a mini Dow at 10279. It closed at 10274
Profit yesterday with this position was $25
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.