Europe Dumps Again, Oil Spikes
Now that expiration is over, it looks like it is back to business.
Futures are sharply lower this morning on the back of weakness overseas,
cutting its sales forecasts, and a spike in oil prices to a one-year high.
(December futures are up $.38 to $30.06.)
Currently, DJI futures are 80.0 lower, S&P futures are 8.00 lower, and
Nasdaq 100 futures are 9.00 lower. In Europe, the FTSE 100 is down 73.10 points,
or 1.89%, the DAX is down 112.13 points, or 3.66%, and the CAC 40 is down 60.11,
or 2.08%. Japan was closed for the autumnal equinox holiday (wish we had one of
those), and the Hang Seng was down 13.35 points, or 0.14%. Interest rate futures
are sharply higher (get your refi in!), the dollar is lower, gold is higher, and
as I mentioned above, crude is higher.
Now we do have oversold indicators popping out the yin/yang, but my guess is
that it will be a sharp acceleration lower sometime in the next week and a half
before we get the bounce. Again, watch for easing chatter to surface ahead
tomorrow’s FOMC meeting. Also, keep your eyes open for intervention. As long as
we are imitating Japan, we might as well go all the way and begin manipulating
stock prices. Expiration is the best time to do it. The best way to detect
intervention is by watching the currency and bond markets. If you see the dollar
suddenly strengthening, or interest rate futures suddenly collapsing, there is
probably some sort of intervention about to be launched.
Volatility tailed off on Friday, with the VIX losing 1.61 to 44.55, the
VXN losing 3.68 to 59.08, and the QQV dropping 3.60 to 50.03. Volatility is very
high, and that is one of the oversold indicators we are looking at. There may
eventually come a time when volatility begins to decline on the downside as well
as the upside, when investors finally throw in the towel, turnover drops like a
rock, and intraday volatility disappears as we begin a slow, miserable, grinding
bottoming process. But not yet.
Update: (09 /20/ 02)
DJX — September 86/90 1:2 ratio call spread expired worthless.
Working Orders (Old Recommendations)
Recap of open trades
Call Spread Positions
DJX — Long the September 86/90 1:2 ratio call spread at $.50 (50%). Expired
C — Long the December/September 30 put calendar spread at $.975(50%). Sold
half at $2.20 on 9/16/02.
C — Long the January/September 30 put calendar spread at $1.20(50%). Sold
half at $2.45 on 9/16/02.
Sold 25% at $4.00 on 9/17/02.
AHC — $71.00 stop, close only.
MMM — $122.50 stop, close only.
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