Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
Jim Brown : 10/30/2006 2:57:52 AM

Reader Challenge Update - The following is the list of the reader challenge plays from last week. The prices listed are the closing prices for Friday and the official starting point for the plays. Anyone who wanted in a play had all day Friday to enter the trade before the official start. The closing prices next Friday will be used as the end point with the percentages calculated based on those two numbers. I will update these as the week progresses

Long Google Puts from reader JK
NOV-$500 Put GOP-WO @ $29.10

Long SanDisk Calls from reader FP
JAN-$50 Call SWF-AJ @ $3.50

Long Newmont Puts from reader GG
JAN-$45 Put NEM-MI @ $2.80

Short SPX Call from reader DB
NOV-1350 Call SXY-KJ @ $33.80

SPX Put Spread from reader GR
Long SPX NOV 1390 Put SXY-WR @ $18.20
Short SPX NOV 1350 Put SXY-WJ @ $3.50
Net debit $14.70

Long Ford calls from reader WR
NOV $9.00 Call F-KL 2 $.15

Long OEX Calls from reader AW
NOV 660 Call OEY-KL @ $.50

Long BOOM Call from reader WO
NOV $35 Call QCB-KG @ $.95

Short QQQQ Calls from reader WL
DEC $43 Call QQQ-KQ @ $.85

Long Sysco Calls from reader KK
NOV $35 Call SYY-KG @ $.55

Long Amazon Puts from reader JS
NOV $40 Put ZQN-WH @ $2.25

Long PCU Puts from reader SB
NOV $50 Put PCU-WJ @ $1.45

Long CME Puts from reader DW
NOV $480 Put CNM-WP @ $3.90

Long TIE Calls from reader JB
NOV $30 Call TIE-KF @ $3.30

Long US Steel Put from reader NM
DEC $55 Put X-XK @ $ $.60

Keene Little : 10/30/2006 1:03:47 AM

Looking a little closer at SPX to see what I think could be happening now, this 60-min chart shows how it found support late Friday right on the uptrend line from Sept 22nd and this is an important trend line. I depict a brief consolidation above the trend line on Monday, a break of it and then a retest early in the week. Link

This is obviously a bearish depiction, calling Thursday's high as the high. But we'll need to see the uptrend line break to prove that. Otherwise this could simply turn back up and continue its choppy rise to new highs. Hopefully we'll get our answer on Monday.

Keene Little : 10/30/2006 12:20:00 AM

I received a question on Friday (sorry I couldn't get back to you before the close):

I've been following your market commentaries on Thursday and have a question. From March 2003 to June 2003 we had a similar price action to what we're seeing today with the recent rally. In 2003 price consolidated and then continued up. What would be the argument for that to not happen again today?

This is a great question Somgya. For a review, here's a chart showing SPX during the 2003 run up (left chart) and today's run up (right chart) as a comparison. Link

The short answer to your question is because the current run is at the end of an EW count whereas the move up in 2003 was at the beginning of the count. After the retest of the October 2002 low in March 2003 it was off to the races to start the bull market run. In order for us to see a replay of the last half of 2003 we'd have to assume we're still in the middle of the bull market, which of course could be true but that's not the way I see it currently. Link

In the larger wave count from August 2004 I've been looking for a 3-wave move up as the final 5th wave, which is what we currently have from this past June. As shown on the chart on the right, I've got an A-B-C count up from June. That count says we should expect a sharp decline once the top is in. It's possible the move up from June is just wave-A which means we'll get a larger decline to be followed by a run to new highs next year. There are lots of reasons I don't believe that will happen, primarily because of my expectations for a recession next year.

But if we get a choppy decline from here that turns more into a sideways/down correction then instead of an A-B-C move up from June it will look like a 1-2-3-4-5. That would mean a new high should be expected after a relatively short choppy bull-flag pullback (one that lasts a little longer than the decline into the July low). Again I'm not expecting to see this happen but I'll let price prove it.

A bull flag pullback and another new high would delay the top but it would still set up the start of a much bigger decline. It's more a question as to whether this high is it or another one in early 2007 after a pullback. The answer to that question is unfortunately weeks away and it takes a break below June's high of 1280 to confirm it will stay a 3-wave move up from June. A break of the 50-dma would be the first clue that something a lot more bearish is unfolding.

I hope I answered your question adequately. Without getting into a much longer answer my expectations for a different pattern this time has to do with where we are in the cycles. I'm expecting an end to the bull market run and therefore I don't expect to see the same pattern we saw in 2003. Great observation and question Somgya. Keep them coming.

Keene Little : 10/29/2006 11:42:41 PM

Monday's pivot tables: Link and Link

OI Technical Staff : 10/29/2006 9:59:59 PM

The Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

OI Technical Staff : 10/29/2006 8:59:59 PM

The Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Market Monitor Archives