We Could Bounce Today, But…

  • September 24, 2004
  • Mark Melin


Thursday Recap: 
The cash Dow continued to push
lower on Thursday, not even getting a dead cat bounce.  Ultimately the cash Dow
could be headed towards the 9900 level or the 30 level on the RSI.  When we get
close to these levels we could start to see some support. 

For it’s part, the NASDAQ
composite had a relatively good showing, bouncing off support at the 20-day EMA
and finding some support near 50 on the RSI.  In the very near term this could
provide support for a temporary attempt to firm. Ultimately, however, we could
see a break of this level and a test of the 50-day moving average, where buyers
might get some real courage and get this market back on track. 

Prediction for
Friday:  We could see an attempt to bounce Friday, but ultimately over
a weekly viewpoint I expect to see the markets test lower levels before making
any serious bounce higher.  On the cash Dow the headline number is 10,000, but
that support is more psychological than anything else.  I think buyers might
seriously enter this market when the cash Dow nears chart support just above
9900.  Ultimately I think the way we get to this level is by grinding it out
with some back and forth chop over the next several days. 

Everyone seems to be
watching the S+P, with the 1100 level getting a lot of attention on the
downside.  Ultimately I think the S+P could come down to touch its 50-day moving
average and the lower Bollinger band trading range down here.  My only
hesitation is that when I turn on CNBC and the usual herd of money managers
starts proclaiming 1100 the target I start to get skeptical. 

Portfolio Strategy: 
We’re going to look to get delta negative if the selling opportunity presents
itself at some point today.  Ultimately I’m going to wait until the markets find
support and then establish a positive bias going into November/December.

Delta: +25.84

Theta: 16.69

Maintenance margin required: $7,739