The end of rate cut?

The Fed indicated that the risks of inflation and slowing economy were balanced. One has to wonder if they are any forward looking. While cutting rate is good for the housing market, but detrimental to the dollar and causing crude oil to hit 95$ per barrel. These are all inflationary. Somehow, Jim Rogers might have a point in putting all investments in Chinese currency. Most of the gains in the market today was achieved before the Fed annoucement. As a matter of fact, the initial sell off was to due to inflation concerns. Although it closed above 717 and still in uptrend mode, it would not be surprised to see a sell off to 718ish. Watch 721 tomorrow closely. My original target of 725 was finally reached today. Option trading is like marathon running, it cannot stop. If it came down and regained its strength later on, although the market was higher but the option premium was not. Based on some early signals, took a small short position today, and sure felt lonely tonight.

2c

Helicopter Ben or with his landing gears out?

As expected, it was a lower high. The downside was a bit out of the norm for a pre FOMC day. May be the market was pricing in a quarter point rate cut. The uptrend has not been violated yet and the line in the sand today was 716ish. But watch closely tomorrow OEX 717 after the Fed annoucement. If it cannot close above that, troubles ahead.

2c

Out

of all Calls. If you had bought Calls on the 22Oct and sold them today the 29Oct, your money would have been doubled in six days. The target was supposedly OEX 725. However, the price action has gone from extreme oversold to extreme overbought. The decision was to liquidate everything without emotion even though the high of today was only 722ish. The pattern that formed today comparing to past pre FOMC days indicated that the probability of tomorrow's high exceeding today's high will be small. The more prudent thing to do would be to stay on the sideline until there is a definitive market reaction to the interest rate outcome, unless you are a gambler. Further, shorting is not advisable because the market has gone back to uptrend and counter trend trading is suicidal. It is also good money management in that if doubling the wagered money is the goal of every trade then once it is achieved, scaled out before the market takes it all back.

2c

Bulls in control again

After breaking out of 711, retested it and never looked back. Buyers were out in full force today and the near term target is still 725. Will look to unload some calls by then or by Wednesday and may leave some calls to play the Fed day. Everything as planned and could not ask for more.

2c

Bottoming process?

This bull/bear tug-of-war will have a decision soon. The bias is up. May be MSFT earnings will do it. It is up nicely after hour at time of writing. Today it traded in between 712r1 and 700s1 and closed above pivot. It better breaks out of 711 tomorrow if the bulls were to regain the long term up trend. Time is running out. Watch 706 tomorrow. If a break out occurs the near term target is 725. A break down is not anticipated at this point with only a few days to FOMC, but if it does, 701 then 691.

2c

Impressive reversal

It is with great pleasure not to have to trade intraday. Trading should be a pleasure, not a struggle. Consider if you can walk away the whole day without checking the market, knowing that you are on the right direction. Today it proves the point. From here on, on a closing basis, the market should continue to climb until of course the indicators say otherwise. The market fell as low as S2 today and from there a rebound was almost certain. Now that the market has retested its low and closed above 707pivot. It is free to go up. Tomorrow's numbers are 712R1, 704pvt and 700s1.

Good luck

2c

A Technical Buy

Buyers came out today with a good showing of closing above 706r1. Tomorrow's numbers are 711r1, 707pvt and 704s1. It is expected to reach the forecasted value of 717 and then onto retesting old high. But, one day at a time. Hold your longs.

2c

Turtle Soup + 1

This is an excellent setup. The day after Turtle Soup, more sellers came in, unfortunately they were the late-comers and the market reversed. In any case, it closed at 702.63 and the numbers for tomorrow are 705.71r1, 700.68pvt and 697.6s1. Looking at the close and pivot numbers, what do you think is the probability of an up day tomorrow?

2c

Horrible

This is when fundamental overides technicals. Because the selling sentiment reached peak level like in August, could not resist to obtain some Nov calls. It could be early but do expect a bounce to 706ish. Have a good weekend.

(Note : This is also a Turtle Soup Buy setup)

2c

Buy Signal finally out

Although long wave analyst predicted a crash in 2007 but right now it should go back up. Notice the low of the day was above 714s1 and it closed near the high of the day. Buyers were not out in full force yet but the downward slopping channel is bullish. Tomorrow's numbers are 720r1, 718pvt and 716s1. Nov OEX 720 calls are good.

2c

Amazing reversal

The anticipated reversal got delayed a day. The good INTC report and the tame PPI got hammered by the horrible 10% decline in housing starts in a month and the drag from IBM. This is what unfair weighting would do to the index. Luckily, it was a V reversal in the afternoon. It closed above the daily pivot 719. The numbers for tomorrow are 724r1, 719pvt and 714s1. There is a good chance that it will hit 727ish in the near term.

2c

Reversal??

The first down side target of 717ish was reached today. Although the price action shows no sign of turning, the volatility index indicates early sign of reversal. It is still in OS zone and it has to clear 719 tomorrow for any sustainable long. The next downside target is 708ish. This of course depends on CPI Wednesday. After hour, INTC announcement of 3Q profit leap elevated related technology stocks such as RIMM, AAPL and GOOG. All were up nicely after hour. Tomorrow’s numbers are 721r1, 719pvt and 716s1.

2c

This came as no surprise…

ID/NR4 is a powerful setup. As soon as it failed to break above 729r1, OEX Nov 725 puts were good.It has entered oversold zone, and whether it will stay there depends on CPI tomorrow (my mistake, it should be Wednesday Oct 17 instead). If tame, as in PPI, a rebound is in place. Watch 728r1, 723pvt and 717s1 tomorrow. See how the range expands after a contraction. If it cannot close above 723, brace for more downside to come. Today, the technical damage is done. All observations mentioned in the past few days materialized. Even Bradley is on target.

As an aside, there was a block of approximately 3,000 AAPL Nov 170 call contracts went through today. Someone must be expecting another blow out earning from Apple Computer, come Oct 22.

2c

Tame PPI

So the bears did not get the follow through today. OEX spent most of the day hovering around the pivot 727ish. The numbers for Monday are 729r1, 727pvt and 725s1 and once again we have a small range and is an ID/NR4. The market will break out from this range. The daily bias is still down. It is hard to believe that the mini-correction lasted one day. There is a very high probability that it will continue next week.

2c

History does repeat itself

If you can identify certain patterns and interpret them by mathematical algorithms, you have a winner. The sell signal was already out yesterday and warning signs were written all over a couple of days ago. One has to discard the intra- day variations to maintain the overall picture. The rally this morning was based on one company’s (WMT) outlook on retail. The rest of the retail industry was lack luster. Further, if one examines closely the Trade Deficit report today, the import price index was inflationary. However, the rally kept trucking along until finally one ECB came out to say specifically that inflation was rising, everybody ran for cover.

OEX Oct 730 Puts and OIH Oct 200 Puts proved to be winners. Money doubled in one day. The numbers for tomorrow are 733r1, 727pvt and 719s1. The anticipation is for the correction to continue albeit tame PPI tomorrow. The widening of r1s1 range depicts WR7 which indicates trend exhaustion.

2c

Toppy

It was a classic sell signal today, although the rally in oil stocks saved the day. It closed at about pivot 728. The high of the day came within 2 points of target 732. Tomorrow's numbers are 730r1, 727.6pvt and 725s1. The trend change of Apr02 to May07's mini-correction was 42 OEX points, and the trend change of Sep11 to Oct9 was also a count of 42 points. If history repeats itself, a mini-correction of 10 to 15 points to OEX 715 is not surprising. The momentum of total index put/call ratio has increased again. For what it's worth, bear in mind the Bradley Model turn date of Oct17 (+ or - 7 days). OEX OCT 730 puts look attractive at this junction and OIH Oct 200 puts are good for more adventurous day traders.

2c

Scaling out....

of OEX 720 Oct calls by the close. The anticipation is one more day of advance with the target of 732. Watch 727.8pvt tomorrow. As mentioned before, it is getting too close to the possibility of a retracement for comfort.

2c

Columbus Day .. The market was lost

With the Bond market closed today because of Columbus Day, the market did not know where to take the cue from. Today’s close at 724.1, although below pivot, is very close to the forecasted value of 724.3 and is still above trend. Tomorrow is another narrow range day with 724.9r1, 724.4pvt and 723.5s1. The uptrend is expected to continue with at least hitting the old high of 728 again. This of course depends on the last FOMC minutes and the earning report from Alcoa tomorrow. One observation was that the lower band is rising to meet the forecasted value and a mini-correction may be in place soon to take the market down to 710ish. The momentum of total index put/call ratio rised today in synch with a rising market. However, it is also a precursor to a fall after the last phase of an up cycle.

2c

Just follow the trend

As anticipated it broke out of the narrow range, to the upside, because of the employment data. Got OEX OCT 720 calls as the market retreated back to 723r2. Now we have a range expansion. Next set of numbers are 732r2, 729r1, 725pvt and 722s1. The near term target is 732r2. It should be riding on r1. This is a classic buy signal with VXO's ugly head coming back down. Conservatively, there should be one to two more days of up momentum. It would not be surprising to see Tuesday’s FOMC minutes giving the market another push. After that, it will all be about earnings. Coincidentally, total index put/call ratio has dropped to a low point.

2c

A day about nothing

It was such an uneventful day. Everybody was waiting for the employment number Friday, otherwise, sellers would have been out. Technically, it is short term down trend. Once again, a contraction of r1s1 range which is basically an NR7. The market will break out one way or the other. The numbers for tomorrow are 721r1, 720pvt and 719s1. The market will tell, just follow the trend.

2c

Follow your plan

It is all about numbers. An expansion of R1 S1 followed by a contraction is equivalent to a wide ranging day followed by a narrow range day such as a doji day. In an extended uptrend, this setup represents trend exhaustion. It would be prudent to scale out longs and position shorts. Today was a no brainer. Shorted at pivot 722ish and closed out at S2 718ish. (yes, it was Oct 720 puts. named the pivot option) It was an easy trade. Since it closed below pivot of 722 today, it is in near term shorting territory but long term uptrend is still intact. Watch r1-722, pvt-720, s1-717, s2-713 tomorrow. No buying below 720 and take note of 715, 713 and 708 when shorting. Below 708, the game is over and the market is in long term down trend. It is not surprising to see the market chop around until Friday. There is also the 30 minutes downward sloping bullish channel and eventually it will swing back up.

The ADP employment report today indicated that only about 60K private sector jobs were created last month. If the forecast is 100k jobs come Friday, a total of 40k government jobs are required to fill the gap. The probability of that happening is slim. Further, the report stipulated that the financial and retail sectors were worst off and it is not difficult to deduce that the sub prime problems have already over spilled.

2c

It was a good scrap trade

It was 20% profit for OEX Oct 715 puts overnight. (Thanks to a reader who corrected the mistake, it was actually OEX 720 Puts. The confusion was in translating between OEZVD and OEZVC ). The reader actually brought up a good point. It is important to trade around the pivot and it seems to have the best punch for the buck. Buying sentiment has decreased and the momentum of put buying has increased. The most peculiar technical thing is the constriction of R1,S1. A narrow range of 3 points. The last time it happened was around July 17. It was obvious what happened a short while after. For continual strength it has to close above 723 tomorrow. It may depend on the ADP employment data which is a predictor to the real thing on Friday.

2c

It is impportant to remember the numbers

As soon as it opened today above pivot 715 and headed up, it was clear that shorting was out of the question. The overbought situation turned into a stochastic pop. Greenspan is still influential in moving the market. His comments on subprime issues being over, coupled with mediocre ISM data, fueled the rally. It is important to remember the daily numbers for trading. Price action lower than s2 would trigger a rebound and by the same token, price action exceeding R2 would trigger a pullback. It would not be surprising to see a pullback to 720 which is the pivot for tomorrow. Got a small OEX 720 put position by the close. Slightly early, but let see if the scrap will be successful. This is also in light of the fact that the volatility index is slowly raising its ugly head.

2c