Follow the Money

  • April 6, 2001
  • Jon Najarian

I’m out in Denver, speaking
to a group of 245 investors at the Marriott Tech Center. I love the interaction
with investors and day traders, as there is always something we can learn about
trading and making money. This group is similar to the group I spoke with in New
York earlier this week, stunned by the vaporization of equity. The good news is
they are bloodied, but far from dead.

  

I was preaching the same gospel that I preach to every investor, define your
risk when you enter the trade, not after you’ve bought or sold. I just
finished a teaching segment with TradingMarkets Editor-in-Chief Eddie Kwong detailing exactly what I mean by that, so please take a moment and give it a
read.

  

Today, when our computers kicked out the $ weighted charts I’ve included
below, I noted the bullish straight call volume in the Nasdaq
100
(
QQQ |
Quote |
Chart |
News |
PowerRating), but was more impressed by the heavy $ weighted put
action in the NDX. For those of you that haven’t traded the NDX and most of
you haven’t, it is the institutional version of the QQQ. When you look for
where the big money, institutional paper is going, you have to glance at the NDX
as its sheer size ($1450 as of 10:34 Mountain Time) means that few if any retail
orders are executed in this pit.

  

What that means for you and your trading is that the clearer picture of where
the smart money is going is offered by the NDX, not the QQQ. That’s not to say
institutions don’t trade the QQQ, they most certainly do. However, the NDX
action coming in at nearly 23:1 on the put side indicates that the big boys are
either scrambling for protection (which is also demonstrated by the high
volatility levels) or betting that yesterday’s rally will fade faster than
Chris DiMarco at Augusta.

 Follow
the Money

68,126

 26,074

 136,696

 67,467
290

 1,902

 15,626

 340,374

 Also, Tellabs
Inc.
(
TLAB |
Quote |
Chart |
News |
PowerRating) warned that it will miss earnings estimates and is
under sharp selling pressure. Its shares hit a fresh 52 week low and our $
weighted money flow shows the Bears (Put options) trading 7:1 over the calls.

 Bearish
$ Weighted Put Action:

7,034

 5,428

 7,202

 53,676

 

 Semiconductor
Index

 Internet
HOLDRs

 NASDAQ-100
Tracking Stock

 Mini
NASDAQ-100 Index

 NASDAQ-100
Index

 Biotech
HOLDRs

 Oil
Service Index

 Banking
Index

 Standard
& Poor’s 100 Index

 Standard
& Poor’s 500 Index

 Dow Jones
Industrial Index

(1010WallStreet.com
has licensed the use of Hamzei Analytics proprietary options analytics)

Talk
about it at TradingMarkets World