Will Friday Be A Defining Day?


Thursday, April 1

Thursday Recap:  In our pre-open
prediction for both Wednesday and Thursday, we said the indices would likely
test support and then move higher going into Thursday.  In fact on Wednesday the
indices moved to test support, and the markets moved higher going into Thursday
— albeit with varying degrees of strength. 

Once again, technology led the market.  The NASDAQ was up
over 1%, rising a stiff 20 points to 2015 and pulling within seven points of the
50-day moving average, which has been our target since the NAS bounced off its
200-day average some 7 trading sessions ago.  Also note that the RSI line is
bouncing off 50, which we noted might serve as minor support. You’ll recall that
we have been noting a rotation into technology for the past week, a significant
development and another positive for market bulls.

 

Although not as strong as the NAS, the cash S&P was
nonetheless up a powerful 5.96 points, ending close to a point away from our
50-day moving average target.  On Friday, this could be the index to watch.

The worst-performing index of the day was the Dow.  Early
in the morning the Dow Jones and Company announced that three stocks were being
pulled from the index, and this unexpected news was a drag on the market’s
measure, as the cash Dow only gained some 15 points on the day.  However, the
big board once again displayed strength, with advancers beating decliners by
close to a 2 to 1 margin. 

Unemployment Report: Surprise!  Not only was this month’s
jobs report a surprise, but the revisions from the previous months has deep
implications on the Fed’s interest rate strategy.  I’m not going to go into all
the details of the obvious numbers, but I think it is important to note that
this report changes many core assumptions on the markets — including mine.

Prediction for Friday:  We’re obviously headed higher on
Friday.  The question is, will Friday be a defining day for the near term
direction of the markets?  Will the indices move to test the recent highs? 
While the pre-open futures markets are soaring, I think a question that needs to
be raised is what will this number do to interest rates?  At what point will
interest rates become a bogy for the markets?  These are questions we’ll be
looking to answer in the coming days.

On the upside with the Dow, we’ll watch the 10480 level,
then again 10520.  Any move over this level might be a little overdone.  On the
downside, we’ll watch to make sure the 50 day moving average holds, which I
would expect.  If the 50 day can’t hold that would indicate a significant amount
of weakness.    

Daily Profit: $140

10500 April Mini Dow Put Options: We are short one put
option. Yesterday this option closed at 180, down 12 points from the previous
close (each point is worth $5). Profit yesterday with this position was $60.

10000 April Mini Dow Put Options: We are short four put
options. Yesterday this option closed at 30, unchanged. Profit yesterday with
this position was $0.

10400 April Mini Dow Call Options: We are short two call
options. Yesterday this option closed at 94, up 4.  Loss yesterday with this
position was $40.

9700 April Mini Dow Put Options: On 3/24/04 we bought 2
9700 mini Dow put options for 75. Yesterday they closed at 12, unchanged. Profit
on the day with this position was $0.

Mini Dow Futures: We came into the day long two mini Dow
futures.  We sold one mini Dow at 10357, up 7 points from Wednesday’s close.  We
sold one mini Dow at 10367, up 17 from Wednesday’s close.  Profit yesterday on
this position was $120. We are now flat the mini Dow.

 

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