Two Dow Support Levels I’m Watching

Friday Recap:
In our prediction for Friday
we said we could see the markets attempt to bounce Friday, but that ultimately
we were looking for lower levels this coming week.  In fact on Friday, the cash
Dow did attempt to bounce — and we sold calls on that bounce, getting our
portfolio delta negative.  The cash Dow started the day higher, stair stepped
its way up briefly above 10075 before sellers took control and ultimately moved
the market’s measure to close just under 10050 to end the day up only some 8
points on the day.

For its part the NASDAQ has
been leading this market lower and is sitting in important support.  The RSI is
at 50, the MACD is getting ready to roll over, we’re just under the 20-day
exponential moving average and the tech index is sitting on the mid-point of its
Bollinger band trading range.  It is my expectation that we’re going to break
these levels this week and test support. 

Prediction for
Monday:  On Friday we said that we would bounce, then move lower. 
Friday we bounced and on Monday I expect the start of additional legs lower.  On
the cash Dow I’m ultimately going to watch the Dow test and likely break weak
support at 10,000, then test more significant support at 9925.  This all might
not happen Monday, but it could take place over the course of this week.  If
9925 breaks we could see a test of the lower trading channel — which could take
the Dow to new yearly lows. 

Portfolio Strategy:
Right now we’re delta negative.  We’ll watch for a potential test of upport and
then potentially get positive.  Further, we’re likely to rotate some of our
options to the forward month.  Members, keep you eye on your e-mail for trade
recommendations