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  Jeff Bailey   12/18/20,  6:12:06 PM
Day traders .... Maybe I've assumed wrong, but for ANY day trade I profile, I'm assuming the trader has the minimum $25K day trading capital, required by the SEC, for day trade status.

I do NOT suggest trading 100 shares of MSFT, a $27 stock, or 100 QQQ, a $35 security for a day trade.

This is not intended to put down a trader with $2,000, $5,000, or $10,000, where if he/she begins to enter and close out trades in rapid fashion (day trading) and his/her account is then flagged by the broker as "pattern day trader" where you can then not trade on margin.

There is NO money to be made in a day trade with an upside target for a $0.25 gain, if I'm paying $20 commission (in/out) on 100 shares. It is simply NOT worth the risk.

For swing trades, I'd suggest reviewing the OI Play list. NOT just the trades currently open, but even those that may have been stopped out of the option (often times the stock reversed back in the direction of the pick) and the scenario that was in play at write up, is STILL IN PLAY and the TECHNICALS still confirm the scenario laid out.

One reason I (Jeff Bailey) profile day trades in a stock like MSFT, or AA, is that a light bulb goes on, that makes sense to me as it relates to the Index Trader Wrap.

  Jeff Bailey   12/18/20,  4:30:43 PM
Max Pain Theory .... has any other analysts written an article on this? I've gotten a lot of questions regarding this theory.

Very simply stated, it is a running total of all options (put and call) for a given months expiration, where the "max pain theory" says that for the options market maker to make max amount, the max pain level derived from the mathematical equation is where the stock should settle.

It is often times "hit or miss" as noted by the SPX max pain, but is sometimes used by traders, when close to current trade, as just ONE piece of information, that can go into a trader's scenario. It is NOT a theory that a trader counts on.

A trader has to be careful though. For instance, if I thought IBM might gravitate to $90, and shorted the stock all day based on this thought, there might well be a buyers that has information that will have IBM trading $100 on Monday, and that buyers is glad to take all he/she can get at $92.50 or any other price, based on the information he/she has.

  Jeff Bailey   12/18/20,  4:11:02 PM
QQQ $35.69 +1.89% .... 2 minutes to close. Session high has been $35.64.

  Linda Piazza   12/18/20,  4:01:57 PM
As I mentioned this morning, one chice for someone in the hypothetical OEX 535/540 OEX bear call credit spread would have been to buy back the sold call for a loss when the OEX started climbing, and then hold onto the bought call as a lottery play, if that person believed that the OEX would continue to go higher today. As of a few minutes ago, that person could have sold that call for $1.45. This morning, closing out the whole position would have resulted in a $1.45 loss, I believe, but that would have meant selling the bought 540 call, too, at about $0.40, I believe. That means that if only the sold call had been bought back and that player had held onto the bought 540 call, the loss this morning would have been $1.85. Selling the 540 call this afternoon when it was bid at $1.45 would have then mitigated the loss to $0.45--not bad when two weeks elapsed and the OEX moved up more than 10 points from the entry. Of course, the idea is to make money, not mitigate losses, but this shows that even a worse-case scenario isn't as bad as it might have been with a purchased put. If I had been able to study charts in depth this afternoon, we would have looked at the possibility of holding that call into tomorrow's trading, perhaps even ending up with a profit.

  Jeff Bailey   12/18/20,  3:57:30 PM
IBM (IBM) $92.63 -0.81% ... must be something wrong. Notable lag for the INDU.

Hmmmm.... "max pain" is $90.00. It is quite notable that day's low found continued support at $92.50. IBM trades options in $5.00 increments.

  Jeff Bailey   12/18/20,  3:46:09 PM
MSFT day trade alert $27.35 +1.14% ... with MSFT back up at BLUE #3 and session high, closing out day trade long as market close is 12-minutes away.

Max pain is $25.00.

  Jeff Bailey   12/18/20,  3:43:45 PM
Maxim Integrated (MXIM) $48.64 +3.26% Link ... this semiconductor was on my list for a partial short/put position on a 3-box reversal back up to $50.

Since SOX.X showed some tie with "max pain" level, I thought I'd also look at MXIM December expiration max pain. I see $50 as the level. Stock options don't expire until tomorrow, but so far today... MXIM has rallied to a session high of $49.02.

Bearish stop on the underlying stock would be at $53.00.

  Jeff Bailey   12/18/20,  3:38:05 PM
SOX 493.22 +3.88% ... lower after trading "max pain" at 495.

QQQ $35.50 +1.69%

  Linda Piazza   12/18/20,  3:37:53 PM
Also working from memory, it appears that the SOX moved up to challenge its 60-minute 100-pma, and also moved up to challenge the bottom of the 12/12-12/15 gap, and has moved down slightly from there. This should be a difficult level for the SOX, especially with the round-number resistance at 500 just overhead, but it's surmounted several others today.

  Linda Piazza   12/18/20,  3:34:20 PM
I'm working from memory since my dial-up connection is so slow that I'm not able to pull up all my charts yet and can't get all my technical indicators on the charts that I can get, but I don't remember significant historical resistance in this area on the OEX, other than from the expected round-number resistance. Stronger resistance lies up near 544-546, I believe, with that resistance showing up on an examination of the monthly chart. However, I believe that 30-minute and 60-minute envelopes were showing some resistance near this level.

  Jeff Bailey   12/18/20,  3:29:19 PM
QQQ alert ... day trade bullish target of $35.63 achieved with session high so far of $35.64.

  Linda Piazza   12/18/20,  3:15:48 PM
I've lost my connection (Doesn't that always happen when the markets make a strong move?), and on dial-up, trying to get everything up and running. I apologize for my absence. What did we ever do when we were all on dial-ups? It's so clunky!

  Jeff Bailey   12/18/20,  3:09:30 PM
03:00 Internals at this Link

Notable advance jump in the NASDAQ in last hour. May suggest indices closing at their highs of the session.

  Jim Brown   12/18/20,  3:04:59 PM
Despite the ramp in the A/D line on this short covering/buy programs the VXO has spiked. Must be come traders getting nervous at this level. Link

  Jeff Bailey   12/18/20,  3:03:06 PM
MSFT $27.34 +1.10% ... I think that was a bad tick down to $27.22, but on alert here for a program setting up. Thats right back into that big volume spike I made note of at 14:33:26.

  Jeff Bailey   12/18/20,  2:58:28 PM
QQQ $35.56 +1.86% ... Day trade bull stop adjustment alert ... raise stop to break-even. Just in case SOX.X at MAX Pain and bond market close brings action.

  Jeff Bailey   12/18/20,  2:55:46 PM
Semiconductor Index (SOX.X) alert 495.03 +4.26% .... just noticing that this was the published "max pain" level for the SOX.X.

  Jeff Bailey   12/18/20,  2:53:59 PM
MSFT $27.32 +1.03 ... moved up to $27.36, now the comeback test of BLUE #2 of $27.31. If MSFT will bounce and make the move back to BLUE #3, then sense the bullishness holding.

Bond market closes in 5 minutes so be alert! Not sure that bond market will have any impact on today's trade, but might trigger something.

  Jeff Bailey   12/18/20,  2:51:00 PM
QQQ ... on the move above $35.50, did see some pickup of volume of 1.55 mill and 1.548 mill on the following 2 5-minute bars. My eyeball approach would have average 5-minute volume at about 1 million.

  Jeff Bailey   12/18/20,  2:48:27 PM
QQQ $35.55 +1.83% ... just a note.. do as you please with an intra-day bullish target, but if I stack my 5-MRT higher, then BLUE #7 lines up with WEEKLY R1 of $35.76.

  Jeff Bailey   12/18/20,  2:46:20 PM
QQQ $35.56 +1.84% ... session high has now been $35.59.

  Jeff Bailey   12/18/20,  2:43:53 PM
Day trade alert ... Microsoft (MSFT) $27.35 +1.10%, long here, stop $27.18, target $27.49.

  Jeff Bailey   12/18/20,  2:42:54 PM
Microsoft (MSFT) $27.32 +1.07% ... back above BLUE #2.

  Jeff Bailey   12/18/20,  2:41:55 PM
Russell-2000 (RUT.X) 545.50 +1.26% .. highs of the day

  Jeff Bailey   12/18/20,  2:41:19 PM
OEX 539.43 +0.79% ... highs of the day.

  Jeff Bailey   12/18/20,  2:40:54 PM
SPX 1,086.97 +0.97% ... highs of the day

  Jeff Bailey   12/18/20,  2:40:30 PM
Dow Industrials (INDU) 10,226.45 +0.8% ... highs of the day.

  Ray Cummins   12/18/20,  2:40:26 PM
Spreads/Combos/Premium Selling -- A Banner Day!

Well, it seems obvious that today's session may be the core of the long-awaited "Santa Claus" rally and the Spreads/Combos portfolio certainly reflects the extensive buying pressure across the major market sectors. In fact, there are many bullish issues (beyond those I listed earlier) that warrant mention but unfortunately, I must depart for a much more important (family) activity: my daughter's gym class. See ya tomorrow!

  Jeff Bailey   12/18/20,  2:38:54 PM
QQQ $35.51 +1.71% ... high tick of the day here. Let's see what kind of volume come in.

  Jeff Bailey   12/18/20,  2:38:05 PM
QQQ $35.49 $35.49 +1.66% .... are you looking at the 5-minute chart? What is most likely going on here is short finds this a very good risk reward trade, where he/she is shorting QQQ just below $35.50, might be the high of the day. If it isn't, turn and cover at $35.52.

  Linda Piazza   12/18/20,  2:33:29 PM
The SOX hovers at its 30-minute 130-pma. It's going to have an arduous task ahead as it tries to climb, as it will no sooner surmount that average than it will face the 60-minute 100-pma at 495 and then will move into the 12/12-12/15 gap soon after that. That gap has not been tested since the SOX fell throughout the 15th, so we should expect to see gap resistance either at the top, bottom, or middle of that gap. The 30-minute CCI declines, but other oscillators are flat, including momentum, 21(3)3 stochastics, and MACD. It's impossible to predict direction from those clues, but I suspect that the SOX is consolidating ahead of another push up. I'm just not so sure it will get very far if it does push up.

  Jeff Bailey   12/18/20,  2:33:26 PM
Microsoft (MSFT) $27.29 +0.88% ... has been strong relative to QQQ in recent weeks. Here's intra-day chart of MSFT, where we can tie some levels of trade to our QQQ on what is uncertain triple witch. Link

  Jeff Bailey   12/18/20,  2:16:49 PM
QQQ intra-day chart with 5-MRT. Link

Intra-day observation is that once the QQQ traded an new level of blue retracement, it NEVER came back two levels. Observation is that QQQ should NOT trade back at $35.29 after trading $35.50 if bullishness is to continue to build.

  Linda Piazza   12/18/20,  2:11:03 PM
The RLX gains today, continuing to build on the bounce that began on Tuesday after the RLX hit a low not seen since early October. This move had taken the RLX back above the 370 level that had served as support and might have been presumed to be resistance. Not so. However, that's brought the RLX up to test a trendline that might very well be a H&S neckline. Link We've seen a lot of H&S formations that just don't pan out the way they're supposed to do, though, not hitting their downside targets, so it's possible that this will break through that supposed neckline.

  Jeff Bailey   12/18/20,  2:09:55 PM
QQQ $35.45 +1.55% ... often times, when we see this type of bullish build for the indices, where they just go straight up and never really see the slightest bit of pullback intra-day, the indices will close at their highs of the session.

Jim Brown will often give a buy/sell order on close read, and it is my guess that should Jim give us this today, it will be rather heavily weighted on the buy side.

What a day trader bull might look for is strength into the close, where the DAY trader waits until the closing bell to close their trade.

Eye on the QQQ should it trade above $35.50, will try and get a read on volume.

  Ray Cummins   12/18/20,  2:07:39 PM
Spreads/Combos/Premium Selling -- Oil Service Holdrs (OIH)

This calendar spread candidate is also "on the move" today, up $2.42 at $62.23, and the past week's upside activity has offered a number of favorable early-exit opportunities in the speculative position. Tuesday's closing price for the OIH was almost exactly at the sold strike ($59.98), providing a credit of up to $0.40 on $0.80 invested for less than one month in the bullish spread. In addition, the rally in OIH shares infers strength in the underlying oil service group and many of our bullish portfolio plays include issues in that market segment. Among these are positions in Noble (NYSE:NE), Smith International (NYSE:SII), Patterson-Uti Energy (NASDAQ:PTEN), and Valero Energy (NYSE:VLO), all of which are currently profitable.

  Jeff Bailey   12/18/20,  2:04:24 PM
02:00 Internals at this Link

  Jim Brown   12/18/20,  1:59:00 PM
Program trading came in at 43.2% last week. Link
The last 10 week average is 41.4%. This is a 29% increase over 2002's average of 32.1%. An average of 1.06 billion shares a day were traded in Program trades last week on the major exchanges. That's some heavy "lifting". Joe

I suspect that will hit a record the first full week in January!

  Jane Fox   12/18/20,  1:55:46 PM
Alliance Capital Management has agreed to pay a record $600 million in fines to settle charges that it defrauded investors by allowing market timing in some of its mutual funds. As part of its settlement, Alliance will pay $250 million to fund shareholders who were damaged by the fraud in conjunction with a 20% cut in mutual-fund fees for at least five years. The freeze on fees is estimated at $70 million per year, or $350 million over the five-year period.

  Jeff Bailey   12/18/20,  1:53:57 PM
QQQ $35.43 +1.5% .... session high has been $35.50, which is BLUE #5 of 5-MRT. It's been a slow steady move higher after the jump at the open. The big question will be can it continue to the close.

In my opinion, there is NO TOUGHER TRADE than that found leading just up to, and right after a triple witch expiration. If we're going to initiate a new position, about all a trader can do is set some type of logical target by using the tools at hand, keep a tight stop, and let'r rip.

  Linda Piazza   12/18/20,  1:48:08 PM
The OEX monthly chart shows the OEX just above the top of a S/R zone that topped out near 536.50, with the next being near 544-546. This week, the OEX has already surmounted the presumed to be strong 531-533 zone and the somewhat weaker 535-536 zone. The daily chart shows it going almost vertical, with MACD turning up along with the OEX climb but not yet reaching levels above the MACD high from September. While I wouldn't want to get in the way of a vertical climb like this, at some point, the OEX might need to retrace to confirm support at 527-529 if not lower, near 517, the site of one intermediate-term ascending trendline.

  Ray Cummins   12/18/20,  1:46:03 PM
Spreads/Combos/Premium Selling -- Take-Two Interactive (NASDAQ:TTWO)

One issue that is NOT participating in today's rally is TTWO. The stock is down $2.09 at $28.30 after the company announced the SEC was on the verge of bringing a civil action against it. Apparently, a previous investigation into TTWO's accounting procedures has been escalated with a so-called "Wells Notice," in which the agency informs a company it may be planning a civil action. The news comes almost two years after the SEC launched a formal investigation of TTWO, when the company announced (in December 2001) that it would restate financial results for the previous seven quarters. Fortunately, we have only bearish positions in the issue and today's activity definitely confirms the recent unfavorable technical indications.

  Jeff Bailey   12/18/20,  1:44:44 PM
CNBC reporting a FedEx airplane crashed in TN, upon landing.

  Jane Fox   12/18/20,  1:40:40 PM
As SPX makes new highs and the $RUT.X lags the spread deteriorates even more today. Link

  Linda Piazza   12/18/20,  1:39:33 PM
We're entering the typical stop-running period. I've never been good at deciding which direction that stop-running period is going to take the indices (except against my position, whatever it might be that day), but today's could take the OEX up to new highs or down below the current congestion zone. It's important to remember that it's not only what happens during the stop-running action but also immediately afterwards that's important. If the indices are run up to new highs, but quickly slapped back, that tells market participants one thing. If they're run up to new highs, hesitate, then shoot up again, that says something completely different.

  Linda Piazza   12/18/20,  1:33:50 PM
The SOX has now moved above the 30-minute 130-pma. As it moves higher, some oscillators flatten, however, so it's possible this could be one of those times when the SOX overruns the averages a bit, as it sometimes does. If it should now fall back below the 100-pma at 488.56, that would be a bearish development.

  Jim Brown   12/18/20,  1:33:15 PM
That last buy program put a huge spike on the A/D line and I am thinking it is about to implode. Link

Update, no implosion, we got a sharp sell program that was immediately bought. A/D back to new highs.

  Ray Cummins   12/18/20,  1:22:14 PM
Spreads/Combos/Premium Selling -- ebay Inc. (NASDAQ:EBAY)

The king of online auctions is "back on track" today, up $1.96 at $59.25 and threatening to climb to a new 2003 high as investors pour money into online retailers. Analysts say web-based sales are surging this holiday season and traders know that eBay generally benefits from a rally in the e-commerce group. Our speculative position in the issue involves a long call in January and a short call in December, both at the $60 strike. The resultant spread is horizontal (calendar), with low initial cost and large potential profit, and it benefits from the fact that time erodes the value of the near-term option at a faster rate than the far-term option. With eBay trading near $60, the current credit in the spread is $1.75, a profit of up to $0.55 in less than one week. Conservative traders are urged to lock-in gains while the play is near maximum (pre-expiration) profit and look for another successful position.

  Linda Piazza   12/18/20,  1:15:34 PM
The OEX just keeps climbing the underside of the trendline that I posted in my 11:35 post. It has a rounding-bottom look on intraday charts, except that rounding-bottom is forming at the top of a climb and not at a bottom. I keep watching the 30-minute MACD threaten to make a bearish cross and then seeing the lines turn up again.

  Jeff Bailey   12/18/20,  1:14:29 PM
QQQ $35.49 +1.63% ... day trade bull stop adjust alert ... stop should be $35.26. NOT $35.36. The $35.26 stop is based on BLUE #3 of $35.29.

  Jeff Bailey   12/18/20,  1:06:20 PM
QQQ $35.42 +1.4% ... day trade long alert here, stop $35.26, target $35.63.

  Jeff Bailey   12/18/20,  1:05:14 PM
01:00 Internals at this Link

  Ray Cummins   12/18/20,  1:01:48 PM
Spreads/Combos/Premium Selling -- Accredo Health (NASDAQ:ACDO)

Shares of ACDO are enjoying a much-needed rally today, up $1.42 at $30.87 with no public news to explain the move. From a technical viewpoint, the issue bounced at a short-term support area near $29.50, so any upside activity supported by average (or better) volume will be seen as a continuation of the recent trend. Our call-debit spread (JAN-$25/$30) was in jeopardy during Wednesday's session but there were a number of support areas in the high 20s, so the risk of a severe decline was minimal. Traders should watch for a follow-through above resistance at $31.25 and then again at $32, before initiating new "bullish" positions.

  Jeff Bailey   12/18/20,  12:46:57 PM
Abbot Labs (ABT) $46.46 +1.88% ... released for trade.

Company announced it has received FDA determination letter regarding its Lake County diagnostic mfg. operations. The FDA indicated that ABT's processes are in conformity with the Quality System Regulation.

  Ray Cummins   12/18/20,  12:45:57 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Multimedia Games (NASDAQ:MGAM)

Another volatile issue is continuing its winning ways today, up $2.40 at $42.70 despite "short sellers" and market pundits who say Multimedia faces serious regulatory and competitive risks. Rather than focus on the fundamentals, our approach to stocks like MGAM is almost purely technical because it is more compatible with short-term trading strategies and offers the best method for timing entries and exits. Regarding MGAM's outlook, we noted the potential for a test of near-term resistance at $44 in Wednesday's MM and it appears that event will occur sooner than later. The stock is coming off an oversold condition with two days of above-average volume, thus the possibility of a new 2003 high is very likely. Our current position is bullish; short put at $35, so we welcome the upside activity.

  Linda Piazza   12/18/20,  12:39:24 PM
As I suspected it might, the SOX climbed above the 30-minute 100-pma and heads toward the 30-minute 130-pma.

  Jeff Bailey   12/18/20,  12:27:45 PM
Abbot Laboratories (ABT) $45.96 +0.78% ... halted news pending.

Watch you stops, etc, etc,.... with what we've seen lately. Being NYSE listed, lesser chance of getting messed up, but check things when ABT released for trade.

  Jim Brown   12/18/20,  12:22:08 PM
AFL halted news pending

  Linda Piazza   12/18/20,  12:21:40 PM
Today, the FTSE ended the day near its day's high, up 43.10 points or 0.99%, at 4397.30. The CAC also closed near its high of the day, up 23.34 points or 0.67%, at 3503.21. The DAX has traded 23.21 points higher or 0.61%, at 3870.88. The FTSE managed a close back above its 50-dma, with MACD flattening just above signal. The CAC and DAX are above their 50-dma's, but their oscillators look weaker, with both RSI and MACD appearing to be ready to roll down again.

  Ray Cummins   12/18/20,  12:17:45 PM
Spreads/Combos/Premium Selling -- Portfolio Activity: Rambus (NASDAQ:RMBS)

It was nice to see a small rebound in this issue today after Wednesday's late-session tumble. As most of you know, RMBS shares plunged yesterday afternoon when Administrative Law Judge Stephen McGuire said he needed more time before ruling on whether the company illegally monopolized key computer chip technologies. The announcement surprised investors and they unloaded the stock in droves, resulting in a 14% drop in RMBS' share value. At issue in the FTC case are patents for a technology used in computer memory, and the government is seeking to deny Rambus billions of dollars in royalties it could reap from chip manufacturers. Until the outcome is settled, the stock will continue to be volatile and traders who sell "premium" with RMBS options would be wise to keep their stops close or monitor the issue on a continuous basis.

  Jeff Bailey   12/18/20,  12:13:20 PM
S&P 500 Index (SPX.X) 1,082.64 +0.57% .... session high so far has been 1,083.74, which would be just above its MONTHLY R1 of 1,083.47. This would be about the only level within the MATRIX I see that would be any type of resistance at this point in the session.

INDU took out its correlative DAILY R2 10,180 and WEEKLY R2 of 10,176 earlier.

  Linda Piazza   12/18/20,  12:08:07 PM
The OEX is now testing that Keltner channel support, although the support doesn't look as rock-solid as it did earlier. The various Keltner channel lines have spread out a bit, allowing the OEX to slip between them one by one rather than face them all at the same time. Once below 535.50, Keltner support spreads fairly thinly, so if the OEX should fall below that level, it's possible that it could fall rather quickly down toward 535.34, the midline channel support.

  Jeff Bailey   12/18/20,  12:06:14 PM
12:00 Internals at this Link

  Jim Brown   12/18/20,  11:59:45 AM
Philly Fed update - Future expectations lower than last month, costs rising.

Overall expectations for the next six months remain optimistic, although most future indicators are lower this month than last month. While the diffusion index for future manufacturing activity decreased from 63.4 to 52.3, it remains at a relatively high level (see Chart). The future new orders index fell 8 points, and the future shipments index fell 5 points. Firms expect unfilled orders to increase over the next six months and delivery times to stay near their current level. More firms expect inventories to rise over the next six months (28 percent) than expect them to decrease (19 percent).

  Jonathan Levinson   12/18/20,  11:59:23 AM
Correction, it was 32.1.

  Jonathan Levinson   12/18/20,  11:55:57 AM
Philly Fed 32.

  Jonathan Levinson   12/18/20,  11:53:41 AM
Awaiting the Philly Fed, exp 25.

  Jeff Bailey   12/18/20,  11:50:24 AM
Dow Tranports (TRAN) 2,959.00 -0.24% ... while lagging today's move, quick check of components shows FedEx (FDX) $67.92 -4.3% being the drag. Breadth positive at 15:4.

YELL +2.35%, AMR +2.06%, NWAC +1.95%, DAL +1.57%, SCST +1.56%

  Linda Piazza   12/18/20,  11:45:45 AM
The SOX is still turning down below its 30-minute 100-pma, but it's not doing it convincingly. I'm wondering if it's not going to try to bounce up and test the 130-pma, too, now at 491.34, with the SOX at 487.39.

  Linda Piazza   12/18/20,  11:35:29 AM
Every time I try to clean up my charts so that they don't look like Pick-Up sticks, something like this happens and I can't bring myself to let go of the old trendlines crisscrossing my charts: Link (Note: this is a cleaned-up version of my chart to show only one trendline.)

  Jonathan Levinson   12/18/20,  11:33:19 AM
The put to call ratio is steady at .84, at the high end of neutral, with the VXO at 15.06. There's no indication of excessive optimism in the put to call volume so far, though the VXO remains extremely low. Ten year bonds are up 1 basis point, while gold and the miners are down more substantially, 3.20 for Feb gold and -5.48 for the HUI. The TRIN.NQ is low at .38, close to but not yet at unsustainably low levels. In other words, in most things I'm watching, there's no sign of a top in equities yet. Only the price-based oscillators, most of which are maxxed out and trying to rollover, indicate cause for concern.

  Linda Piazza   12/18/20,  11:20:32 AM
Massive Keltner support appears to be gathering near OEX 537.50. Let's see if it holds.

  Linda Piazza   12/18/20,  11:18:48 AM
Since about 10:06, the advdec line has been falling, while the indices were climbing to new highs. While the advdec line remains strongly positive, that's not strongly positive action, and bears watching.

  Linda Piazza   12/18/20,  11:08:38 AM
While the Dow, SPX, and OEX reached new highs, the Wilshire 5000 still has not. At 10,523.04, it's still below the 12/15 high of 10,549.76. The $TRAN also has not reached a new high, of concern to those who want to see the Dow and its sister index, the TRAN, confirm each other by reaching new highs within a short period of the other index hitting a new high.

  Jeff Bailey   12/18/20,  11:02:12 AM
11:00 Internals at this Link

  Linda Piazza   12/18/20,  10:48:48 AM
The SOX moved up today to test the 30-minute 100-pma, an important test. That average crosses now at 488.31 with the 130-pma at 491.41. A move through both would be bullish, but a move up to test the 130-pma and then a rollover back through the 100-pma would be bearish. That's the presumed outcome since there's been a bearish cross of the 130-pma by the 100-pma, but the SOX does sometimes overshoot these averages a bit.

  Linda Piazza   12/18/20,  10:38:05 AM
I've been caught up with reader's emails this morning, but wanted to mention that we had other choices than closing out the entire hypothetical OEX 535/540 bear call credit spread this morning. If we thought it likely that the OEX was going to climb above 540 by option expiration, we could have bought back the sold option and held onto the 540 purchased call as a lottery-type play. If we had felt sure that today was a pop-and-drop day or that the OEX would not likely climb much higher before tomorrow, we could have held onto the entire position a while longer, letting a little more time premium leak out of the sold call. With that sold call now ITM, however, we would have had to keep a close eye on the position if we'd made that choice, because if enough time premium leaked out, there might be a danger of the sold call being exercised. If we'd thought it was going to be a pop-and-drop day, but weren't quite as convinced, we could have bought back the sold call, waited to see if the OEX turned around, and resold it if and when we thought the OEX was going to roll over. Each choice has its own strengths and weaknesses. If I were trading this myself and not guiding readers, I probably would have bought back the sold call and watched a little longer with the idea that I might sell it again if the OEX looked to be rolling down again or I might have just held onto the entire thing and watched a while longer. If I were guiding readers, I would have certainly suggested buying back the sold call, if not exiting the entire position, as holding the whole position and watching might have been too risky.

  Jeff Bailey   12/18/20,  10:38:03 AM
Market Volatility Index (VIX.X) 15.07 -3.27% ... plunging to new lows. Gumby should find plenty of willing Jan put sellers. (see Jim's 10:15:12)

  Jeff Bailey   12/18/20,  10:34:26 AM
QQQ $35.32 +1.17% .... session high now $35.37. First hour's volume was 21.3 million shares. (see 21:08:11), which looks a little heavy and may indeed suggest expiration related trade.

  Linda Piazza   12/18/20,  10:27:44 AM
Could this still be a pop-and-drop day? Yes, it could. Here's why, with the reason seen as the OEX touches the pink 0.675% envelope: Link

  Jim Brown   12/18/20,  10:25:12 AM
Jim - Can't help but think this is a good time for your laddered DJX put play, targeting January, and just don't think it'll wait till the Sunday editor's play. Thought is 1/3 here, 1/3 at 10250, final 1/3 at 10300. No telling if the second or third parts will ever fill, of course. Hard to go very wrong, with volatility/premiums at such historic lows. Your thoughts? Gumby

Excellent idea. I was going to wait until the Sunday after Christmas but now is a good time to get started. I like the 1/3 entries at the levels you mentioned.

  Jeff Bailey   12/18/20,  10:23:24 AM
QQQ bullish day trade cancellation alert .... I'm going to cancel the previously profiled $35.11 entry at this time, and instead will look for a pullback to that level to find support, but with some expected intra-day volatility, I want to measure QQQ action should it pull back to $35.11. WEEKLY Pivot of $34.94 and morning open might see quick test.

Last 30-minutes has seen QQQ between its 5-MRT Blue #2 and Blue #3.

I'm not overly fond of initiating new positions so near expiration right now. While markets are hard to predict to begin with, expiration that much tougher.

  Jonathan Levinson   12/18/20,  10:19:45 AM
A note- I've been following max-pain pretty closely, and it works great, except for when it doesn't. Like the put to call ratios, it is a secondary indicator only. Do NOT trade maxpain points as the gospel, because they have a habit of missing the mark at unforseen times. Probably redundant for most here, but it bears repeating.

  Jeff Bailey   12/18/20,  10:17:34 AM
10:00 Internals at this Link

Yesterday's internals at this Link

  Jim Brown   12/18/20,  10:17:22 AM
I had another request for the Max-pain numbers I posted yesterday

Max-Pain Points for Indexes for Dec

SPX 1030
NDX 1375
OEX 525
RUT 500
SOX 500
DJX 96.00
QQQ 34.00
SMH 42.50
INTC 30.00
MSFT 25.00
DELL 35.00
IBM 90.00
MMM 80.00
GE 30.00

  Linda Piazza   12/18/20,  10:16:26 AM
Reader Question: 12/16 sold 10 puts on spx1060 for 1.80 for a net of $1774. If potential debit is $1 x 100 for each dollar below strike, then is this position 1x10x100 or $1000 for each dollar below strike. Today my maint requirement for this is showing at $307214 (.75 or $750 to cover). Wouldn't such high requirements preclude doing many of these trades?

Response: Being the chicken that I am, I've never sold naked puts, even though I understand intellectually that the profit graphs have the same shape as that of a covered call play. Each assumes large downside risks. Somehow I can't convince my trigger finger of that fact, so although I've done many covered calls in complete (or nearly complete) comfort and spreads involving the sale of puts, those puts sales are hedged with bought puts. My maintenance requirements have been more minimal, such as $500-1000/contract, because my spreads are typically 5 points or 10 points. Perhaps one of the other writers can help with this? However, here's a quote from McMillan: The requirement for writing a broad-based index option naked is 15% of the index, plus the option premium, minus the amount, if any, that the option is out-of-the-money.. With the SPX currently at 1081.46, however, I can't make those numbers come out to equal the stated maintenance requirement you listed and perhaps those requirements have changed since I purchased my copy of McMillan, but, yes, I would say that would limit one's ability to sell naked options on the indices.

  Jeff Bailey   12/18/20,  10:07:04 AM
Dow Industrials (INDU) 10,180.26 +0.35% ... session high hs been 10,196, which would have had INDU above DAILY R2, WEEKLY R2.

  Jeff Bailey   12/18/20,  10:04:40 AM
QQQ option observations... per last night's market monitor notes.... didn't see much net change in the QQQ Dec. $35 put open interest, but did see QQQ Jan. $35 puts OI increase from 291,994 to 310,426.

QQQ Dec. $35 call OI fell from 240,748 to 235,016.

  Jeff Bailey   12/18/20,  9:59:48 AM
QQQ low/high so far has been $34.95-$35.31

  Jeff Bailey   12/18/20,  9:58:05 AM
QQQ day trade bullish alert .... QQQ $35.27 +1.02% .... I think there's going to be a floor under QQQ at $35.00 today, will look for bullish entry on a QQQ dip back to $35.11, stop $34.81 to begin, target $35.60.

  Jonathan Levinson   12/18/20,  9:57:47 AM
LEI .3, inline.

  Linda Piazza   12/18/20,  9:54:37 AM
The OEX hit a new high, climbing above the 536.53 high achieved on 12/15, coincidentally (or not?) achieved in the first 30 minutes of trading. Because it was a hypothetical trade and not an actual one (this is a danger with paper trading and also with not setting hard stops in real trades) and because the OEX looked to be heading down, I turned my attention from the screen to answer a reader email while this was occurring. I probably would have counseled exiting the hypothetical bear call credit spread as the OEX crossed above 535.95, but now am not sure of the price at which that exit would have occurred. As I'm typing, with the OEX just over 537, the loss would be a maximum of $1.45 + commissions, but should have been less at the time that number was hit. A trader hoping for a pop-and-drop could wait and watch, but that looks dangerous at this point.

  Jeff Bailey   12/18/20,  9:54:21 AM
Buy program prem alert ... SPX = 1,081.74 ... QQQ = $35.27

  Jonathan Levinson   12/18/20,  9:52:56 AM
We have 12.5B in repos just announced, replacing 10B expiring for a net addition of 2.5B.

  Jeff Bailey   12/18/20,  9:52:53 AM
QQQ $35.17 +0.77% ... session high so far has been $35.21, which is 5-MRT blue #2. Break above DAILY R2 of $35.25 most likely has intra-day upside to $35.62 and BLUE #6 from 5-MRT.

  Jeff Bailey   12/18/20,  9:47:10 AM
QQQ bearish swing trade stop alert QQQ $35.16 +0.69%

  Jeff Bailey   12/18/20,  9:45:07 AM
QQQ $35.12 +0.6% ... session high is $35.14. Leading indicators due out in 13 minutes.

  Jonathan Levinson   12/18/20,  9:43:28 AM
Gold is down to 3.30 on the Feb contract, with HUI -5.33 at 230.66, XAU -2.22 at 103.84. Bonds are recovering slightly, and direction for equities is still up in the air.

  Jeff Bailey   12/18/20,  9:37:33 AM
QQQ $35.05 +0.4% ...

  Jeff Bailey   12/18/20,  9:35:06 AM
QQQ $35.05 ... session high $35.11 is MONTHLY Pivot.

  Linda Piazza   12/18/20,  9:34:31 AM
In the first five minutes of trade, the OEX saw a low of 535.20 and a high of 535.88, with a midpoint at 535.54. The OEX currently trades above that midpoint, indicating strength in the earliest trading, but it's tentative strength and we'll get a better picture during the first reversal that typically begins in a few minutes. When researching Donchian channels, I found that an open above the top Donchian channel, as happened this morning, often saw a quick reversal after that first 30-minute candle. We all knew that, though, didn't we? That's why we talk about amateur hour and pop-and-drop days.

  Jeff Bailey   12/18/20,  9:33:30 AM
Sell Prog. Prem Alert .... SPX = 1,078.30 , QQQ = $35.05.

  Jeff Bailey   12/18/20,  9:30:12 AM
QQQ $35.00 +0.28% early.

  Jeff Bailey   12/18/20,  9:28:13 AM
Comcast Corp. (CMCSA) $31.55 Link .... announces $1 billion stock buyback and gives guidance that it expects free cash flow of $2 billion in 2004, driven by 15-17% growth in cable operating cash flow, which comes after a significant reduction in capital expenditures of $3.3-$3.4 billion as the company completes the upgrade of its cable systems.

  Linda Piazza   12/18/20,  9:26:59 AM
Once again we would have had a difficult decision to make at yesterday's close if we'd been in the hypothetical OEX 535/540 bear call credit spread I priced exactly two weeks ago. Remembering that we would not lose money unless the OEX settles above 535.95 - commissions tomorrow, I still probably would have counseled waiting and watching what happens today, but it would have been a more difficult decision at yesterday's close. Near the close, the OEX bumped above the descending trendline off the 12/15 high, so it was difficult to assess whether that jump above the trendline was just due to last-minute short covering in a low-volume environment or due to a true conviction about driving the OEX higher. Thirty and sixty-minute oscillators indicated that the OEX could continue to move higher. If we had decided to take our losses and get out of the play at yesterday's close, those losses would still have been minimal compared to the losses that would have occurred if we had instead purchased an ATM (or perhaps slightly ITM) put position two weeks ago when the OEX was trading near 528.

  Jane Fox   12/18/20,  9:21:45 AM
Jeff, very good summary of the Bullish % numbers in the 9:00 Update. Thank you.

  Jeff Bailey   12/18/20,  9:19:56 AM
09:00 Update at this Link

  Jane Fox   12/18/20,  9:16:27 AM
The NYSE has named Goldman Sachs President John Thain the NYSE's new chief executive. John Reed will remain as interim chairman of the NYSE until a permanent chairman is named, however, will resign as interim chief executive. Mr. Reed repeated that he doesn't want the chairman position, but he said he is willing to remain on the board if asked. Mr. Thain has "asked" Mr. Reed to stay on the board. Mr. Thain starts as CEO Jan. 15.

  Jane Fox   12/18/20,  9:06:31 AM
93% of the 120 chief executive officers surveyed by The Business Roundtable reported they expected higher sales next year. 25% said they expect to add new workers, twice as many as in the group's December 2002 survey. They also predicted that the U.S. economy would grow at a 3.6% rate next year. Their optimism sent the Business Roundtable's economic outlook index to a record 89.6 in December, from 67.7 in October.

  Jonathan Levinson   12/18/20,  8:29:07 AM
8:30am U.S. WEEKLY JOBLESS CLAIMS DOWN 22,000 TO 353,000

  Jonathan Levinson   12/18/20,  7:47:03 AM
We await initial claims for the week ended 12/13, est. 365K, followed by LEI at 10AM, est .3%, the Philly Fed at noon, est. 25, and the treasury budget at 2PM, est. -48B.

  Linda Piazza   12/18/20,  7:20:31 AM
Good morning. The Nikkei eked out an 11.36-point or 0.11% gain in Thursday's trading, to close at 10,104.00. The government reported that rising exports should offset the impact of lost jobs, and did not change its economic assessment for December from the previous month. Other figures revealed that foreign investors were net sellers of Japanese stocks in the previous week. Fearing a future pension shortfall, the government also revealed that it will ask for increases in pension payments by both companies and individuals. Economists argue that such a move would limit both consumer spending and corporate profits.

Market watchers credited the automakers with steadying the market, but the increasing weakness of the dollar for keeping gains in check. Although the dollar was steady against the yen amidst rumors that the central bank would intervene, it continued to be weak against the euro and other currencies. Credit Suisse's Japan section changed its weighting of automakers from 20% underweight to 10% overweight, helping that sector. Semiconductor and airline stocks proved weak, while banks, drugmakers, and telecom-related stocks traded steady.

Most Asian markets traded higher as airliners rebounded from yesterday's big losses after a first confirmed SARS case. The Taiwan Weighted gained 0.29% and South Korea's Kospi gained 0.93%. Investors in Singapore's Straits Times stocks remained cautious, however, with that index losing 0.46%. China Life's IPO continued to lend excitement to China and Hong Kong markets, although their gains proved modest. Hong Kong's Hang Seng gained 0.39% and China's Shanghai Composite gained 0.23%.

Most European bourses also gain. In Germany, the Ifo Institute announced that the West German business climate index rose from November's 95.7 to 96.8 in December. The number was within expectations, but still welcomed as a sign of continued improvement in Germany's economy. JPMorgan upgraded the European wireless sector from its previous underweight to overweight, mentioning the positive revenue growth surprise in this sector as compared to the wireline companies, which disappointed. Moody's downgraded long-term ratings of Volkswagen, sending that stock lower. Energy stocks traded higher. EADS, the majority owner of Airbus, is recovering from earlier losses after its CEO said that radical costs cuts would be needed if the euro traded and held above $1.30 for any meaningful length of time. The ECB's new president, Jean-Claude Trichet, revealed in a Wall Street Journal article his joy that policy makers on both sides of the Atlantic were pursuing strong currency policies. What I can't figure out is this: was he being sarcastic or does Snow have him snowed?

Currently, the FTSE 100 trades up 22.80 points or 0.52%, at 4377.00. The CAC 40 trades up 5.05 points or 0.15%, at 3484.92. The DAX trades up 2.49 points or 0.06%, at 3850.06.

  Jeff Bailey   12/17/20,  9:08:11 PM
QQQ option chain sorted by today's volume at this Link (See Index Trader Wrap)

One test for today's trade being harmful to my QQQ bearish trade is this....

Open interest as of Tuesday's close in the QQQ Dec. $35 puts was 185,577.

Volume in the QQQ Dec. $35 puts was 34,167.

IF an institution was bearish on the QQQ, they wouldn't be buying December $35 puts, they'd simply be shorting the QQQ (only a speculator would buy the QQQ December $35 puts).

With VXN.X falling today, it is my thinking that this indicator falls because of either put selling, or call buying. What has me suspicious of a short-term move higher is that the Jan $35 and Dec. $35 PUTS are the most active today. For the VXN.X to be falling, this implies that the PUTS were sold.

A test for this is to check open interest tomorrow. If today's action in the PUTS has open interest FALLING, then QQQ BEAR feels better regarding tonight's wrap, as the decline in put OPEN interest, to a degree, then suggests that with expiration near, the action in the Dec. $35 contract is simply a ROLLING to January.

HOWEVER!... should open interest increase, combined with the decline in VXN.X, this would then further suggest the opening of put contracts from the naked side. Again.... if institution wanted to be bearish the QQQ at $35, they'd be shorting at current levels of trade, not buying puts.

If the market (institutions) are going to try and drive the QQQ higher tomorrow on an option expiration move, then we may also want to monitor volume in the QQQ. It's one thing to buy/sell options, but they've got to drive the QQQ for the options to move.

Recent first hour volume levels for QQQ ...

Wednesday = 16,261,600 Tuesday = 20,131,400 Monday = 25,339,500 Friday = 19,769,700

Now watch... after all this work, the QQQ will trade in a tight range between $34.50 and $35.00 for the remainder of the week.

  Jeff Bailey   12/17/20,  8:59:20 PM
Pivot Matrix for tomorrow at this Link

  Jim Brown   12/17/20,  8:06:38 PM
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