Lower Open
Futures
markets are pointing to a lower opening this morning. DJI futures are
75.0 lower, S&Ps are down about 9.00 points and the Nasdaq 100 futures are 12.50
lower. In Europe the FTSE 100 is 28.00 points or .66% lower, the DAX is 34.20 or
.93% lower, and the CAC40 is 14.24 points or .42% lower. In Asia, the Nikkei
gained 200.22 points or 2.04%, and the Hang Seng picked up 51.82 points or .52%.
On the economic front, Q2 preliminary productivity came in at 1.1% vs.
consensus expectations of .7%, mildly bullish for the market. The negative
opening is probably due to the fact that WorldCom’s losses are now estimated to
be at least 2B higher than previously thought, and the Emulex
(
EMLX |
Quote |
Chart |
News |
PowerRating)
warning from last night. In addition, Morgan Stanley has downgraded several
names in the oil service sector including WFT, SII, CAM, and BJS (that figures,
I’m long these).
This morning will probably be a backing and filling affair, with the bulls
probably setting up to try and put together an impressive close to a good week.
Nimble daytraders should be looking to lightly buy some dips to play this
probability. In the meantime we continue to construct longer-term bearish
positions for when the music stops.
Yesterday’s move has now set up a test of the July 30 /31 month end markup
highs. If those levels can be taken out and held, a “W” bottom could be
in place, possibly leading to an extended rally. The numbers to focus on:
DJI – 8762 set July 30th
S&P – 911.64 set July 31st
COMP – 1354.4 set July 30th
NDX – 992.34 set July 30th (this
roughly corresponds to 24.70in the QQQ).
Russell 2000 – 402.32 set July 30th
There should be a lot of volatility around these numbers, and the indexes
obviously won’t all arrive there at the same time since the DJI / SPX are
leading and the COMP / NDX / Russell are bringing up the rear.
Volatility
Volatility got crushed yesterday, especially in the Nasdaq related
indices. The VIX fell 3.28 to 39.79, the VXN got absolutely smoked, losing 9.49
to 59.35, and the QQV was reamed as well, losing 8.81 to 50.18. The high to low
moves in the VXN and QQV were mind-blowing with over 10.00 point moves in both!
I’m not a major fan of charting volatility, but it looks as though a head and
shoulders top is in in both the VXN and QQV. We could be on the verge of a
volatility meltdown if this market holds or moves higher.
Trade Updates (Thursday 8/08/02)
BAC- We bought another 25% of the BAC January 50 / 60 put spreads at
$2.00 today. This takes us to a 75% position at an average cost of $2.50.
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Nothing else on the day.
New Actions (New Recommendations)
C- Buy the January / September 30 put calendar spread at $1.00 (50%).
Working Orders (Old Recommendations)
BAC – Buy the January 50 / 60 put spread at $2.00 (25%). Filled
today!
MMM- Buy another 25% of the MMM October 110 / 120 put spread at $2.00.
Closer.
MMM(2) – Sell half the MMM October 110 /120 put spread at $5.50. Far away now.
Working Rolls/Adjustments:
None
Recap of open
trades:
Long-term
Reverse
Collars:
CIEN – Long the January 2.5 / 5
reverse collar at $.40 (25%).
Buy-writes:
HAL -long the January 15 buy-write at $12.05 (100%).
Proxy buy-writes:
DYN – long the January 15 calls at $3.20 – left over from proxy buy-write
(50%). Left for dead.
Complex Strategies:
None
Directional Positions:
AMGN – long the January 30 /40 put spread at $2.50 (50%).
BAC – Long the January 50 / 60 put
spread at an average price of $2.50 (75%).
IBM – Long the January 50 /60 put spread at $2.50 (25%).
Short-term
Call Positions:
None
Call Spread Positions:
DJX – Long the August 86 /90 call ratio spread 1:2 for $.50 (50%).
QQQ – Long the August 26 / 28 1:2 call ratio spread for even money (25%).
QQQ – Long the August 26 / 28 / 30 “Christmas tree” at $.35 (25%).
Put Positions:
None
Spread Positions:
C – Long the December / August 30 put calendar spread at $1.70 (25%).
C – Long the December / September put calendar spread at $1.00 (25%).
MMM – Long the October 110 / 120 put spread at an average price of $2.87 (75%).
Stops
None