Wednesdays Levels
Tuesday Recap: On Tuesday both
the Dow and the S+P cleared their downtrend line and both got close to reaching
our target, but sellers took control before the indices reached their recent
highs. The cash Dow started the day higher, breaking the downtrend line early
in the morning and reaching the highs of the day near 10540 early in the
morning. From here, the Dow backed off and re-tested the downtrend line before
once again climbing higher to re-test the daily highs, only to fail and move and
close below the downtrend line, ending at 10478, up some 33 points on the day.
Charts from www.stockcharts.com
Like the Dow, the cash S+P broke resistance and
moved to test recent highs near 1150 but sellers took control before the index
reached that level. At the time of the early morning test of the daily highs the
time/price opportunities favored sellers.
The NASDAQ was once again the worst performer of
the day and in fact we witnessed a troubling rotation in the markets that we’ll
address in today’s prediction.
Prediction for Wednesday: We’re
likely to test downside support on Wednesday. The question is, have we seen the
recent highs?
There are a few items that are troubling market
bulls. For one, the earnings reports have provided many monster surprises to
the upside and the price action has been muted. Most troubling is that
technology stocks who reported strong surprise upside earnings were in fact many
of the same stocks that could not gain on the news. This highlights a sector
rotation that is taking place from technology to energy and consumer staples.
This isn’t good for market bulls. You can see this rotation within the Dow, as
Johnson and Johnson and Exxon and Mobil were the index’s leaders.
On the cash Dow on the downside we’ll watch
moving average support near 10415-25, which could break. After this we’ll watch
more significant chart support near 10400 and 10330. After this, keep an eye on
10300 and 10250. On the upside, watch the downtrend line, then yesterday’s
daily highs near 10540. If we get near this level, it might be a good time to
sell. On the NAS, keep an eye on the moving averages at 2019 and 2008. This
should provide strong support – and if broken may take the entire markets down.
This the NAS, with the cash S+P watch the moving averages, B on the chart
above. If they break, we could see a test of the lower Bollinger band, near C
on the chart above.
Portfolio Strategy: Right now we are slightly delta negative.
Depending on the market set-up and reaction to support, we might short this
market at some point. Stay close to your e-mail.
Yesterday’s Results and Current Portfolio Status:
Daily Loss : $50
9900 May Mini Dow Put Options: We are long 2 put options. Yesterday this option
settled at 17, down 3. Loss yesterday on this position was $30.
10100 May Mini Dow Put Options: We are short 2 put options. Yesterday this
option settled at 32, down 8. Profit yesterday with this position was $80.
10100 June Mini Dow Put Option: We are short 2 put options. Yesterday it closed
at 97, up 5. Loss yesterday with this position was $50.
10600 May Mini Dow Call Options: We are short 2 put options. Yesterday this
option settled at 65, unchanged. Loss yesterday with this position was $0.
10600 June Mini Dow Call Option: We are short one call option. Yesterday it
closed at 140, up 10. Loss yesterday with this position was $50
Mini Dow Futures: We came into the day flat the mini Dow future. We are now
flat the mini Dow.
Trading Method: 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
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.