Subprime again...

Another one of those days when fundamentals just clubber the technicals and made yesterday's run up a bull trap. May be all those companies who have subprime issues should just step forward and get it over with a thousand point drop in the DOW. After hour CSCO outlook is not good and is down. It looks like tomorrow will be a capitulation day. After all, the original OEX target of 685 is still valid.

Could not get a good entry point to get in long on the OEX except at the end of day, may be early, but will see. Resorted to shorting OIH and playing long on RIMM. Got out when profit reached 10%. Will look to add more OEX Calls tomorrow. Helicopter Ben will be talking tomorrow and see if he can claim the market.

2c

It's a buy now

A confirmed buy signal was out midday and had to reverse to longs. See how it bounced off 701 and never looked back. If you had not gone long, wait until it retraces tomorrow and get in. Watch OEX 706 tomrrow, it should close above it and it also should retrace back to the level where it broke out today. Looking back and counting the number of days, this is the fourth day and is one day early than previously forecasted 5 down days till Wednesday. The real aggresive buy signal was actually out when the market could not break through 696 yesterday. You buy when the selling sentiment was the highest. You have to be a contrarian if you trade options. Since it closed way above the 702-706 level today we should forget about the downside 685 target and instead look to OEX 720 as near term target. Such is the beauty of trading the index, you do it both ways. Don't ask me why the market is still going up in face of all these adverse fundamentals. Just follow the trend.

2c

Shorted again...just couldn't help

OK so we did not get any bounce in the morning mainly because of the Pakistan and Citigroup situations. If your conviction about the direction is strong, you would have shorted when it rebounded in the morning. OEX 696 remains a stubborn support area for the bears to break. This area was tested four times now and around 2.30pm today due to the oversold condition, the market staged a reversal. Impression, but there is basically no change in fundamentals. Even technically, today's close was still below pivot 702 and far remote from 708. Tomorrow's numbers to watch are 706,701,and of course 696. It has to close in the range of 702 - 706 for the bulls to have any chance. If it hangs around 701 for too long, chances are that it will slice though 696 to 685 area. Will see.

2c

So where do we go from here?

We got our better than expected employment report today and the sell-off intensified as anticipated. OK then, what's next? If you were a bear you would have closed your shorts today because the selling sentiment peaked. You could almost feel the reversal by the end of day, especially after it bounced off from 695ish 3 times in the last 10 days. But, do not be fooled. It was mainly short coverings and it may even continue to a small bounce come Monday morning. Yes it is in oversold zone, but the selling is not over yet. Looking at the economic calendar there is really nothing major to push the market one way or the other in the next few days. The PPI report will not be out until the 14th. Watch 708ish closely on Monday and do not trigger buy until a close above 715. If you use the resistance/support line approach, the downside target will be OEX 685ish. This is a 45 point drop from the high of 730 and is approximately Fib 0.6 retrace of the whole upleg (730-655=75) from Aug low. The reason it bounced off from 695ish was because of Fib 0.5 retrace. A drop of another 20 OEX points from today’s close of 705 will bring the DOW to 13200, the long term support. These are rough estimates for trade positioning. Be careful about sites who forecast new market high. At the moment, it just isn’t there. Really felt for Flipper who was 100% long on the day after Fed day with a close to 400 point drop in the DOW.

Good Luck

2c

Uncertainty creates the biggest reward

It was a double overnight. When you have high oil prices, slowing economy, no more interest rate cut, falling dollar, and inflation concerns and you still want to invest in equities? Yesterday's close was a setup for a fall especially in light of the fact that the market had already travelled 30 OEX (600 DOW) points from the low. It was a bit of surprise to see it down this much though. Today's price action has broken the uptrend and there is more downside to come. If the employment report is good tomorrow, brace for another fall. Do not have a downside target yet but count the number of days. Count 5 and that will bring us to next Wednesday as an estimate for down days. Or draw a line to connect the two daily tops and a parallel line to connect the lows(just one formed at the moment) and you will see OEX going below 700 for sure.


2c

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