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Keene Little : 11/16/2006 11:58:05 PM

Friday's pivot tables: Link and Link

Tab Gilles : 11/16/2006 11:36:14 PM

Open Positions Portfolio & Stock Watch List Link

$NAHGH/$NALOW/$NDX/$NDXA200 weekly Link


$NASI Link

Profunds UltraShort OTC (USPIX) & UltraShort SmallCap (UCPIX) Link Link

Energy Select SPDR (XLE)Trailing stop 20-ema. Link

OI Technical Staff : 11/16/2006 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The Market Monitor has been archived.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.

Jeff Bailey : 11/16/2006 7:35:34 PM

Current OPEN MM Profiles that I've made and Watch List at this Link

Note: QCharts' options quotes (bid/ask even last) are not that reliable. Here's a screen capture of Ameritrade's Level II juuuust after the close on CDE (INET) and the Nov. $5.00 Calls (CDE- Link

Jeff Bailey : 11/16/2006 7:17:41 PM

Closing Internals found at this Link

Jeff Bailey : 11/16/2006 4:37:09 PM

Closing U.S. Market Watch found at this Link

Jeff Bailey : 11/16/2006 4:06:27 PM

That should have been 1,033 shares of CDE. (not 133 as typed)

Jeff Bailey : 11/16/2006 4:00:06 PM

Bullish swing trade long close alert ... then sell the entire 1/2 position (133 shares for risk managed) CDE at the bid of $4.96

Keene Little : 11/16/2006 3:59:49 PM

It looks like SPX 1400 is going to be nailed pretty close.

Jeff Bailey : 11/16/2006 3:59:01 PM

Swing trade covered call close alert ... buy back the ten (10) CDE-KA at the offer of $0.05.

Keene Little : 11/16/2006 3:48:06 PM

Follow through is everything but this daily chart of the COMP will have bears smacking their lips. This is a zoomed in shot at the weekly chart I showed below (12:10 PM). Price gapped up today, hit its Fib target of 2452.43 (today's high was 2453.35) and the top of its parallel up-channel from 2004 and at the top of its channel for price action since July. Today's candle (hard to see here) looks like it's going to be a spinning top doji at resistance. Mmm, mmm, mmm, I can taste those juicy steaks already. Link

But this could be just one in a long string of bearish setups that gets busted. A big red candle tomorrow would help solidify the bearish signal here. Until then beware that the trend is still strongly up. I'd start slowly legging into some long term put options here--you certainly can't beat the price. Short term I still like the possibility for a pullback and at least another run to retest the high or make a new high next week so that's why I'm suggesting carefully building a short position starting here.

Jeff Bailey : 11/16/2006 3:33:04 PM

VIX 10.05 -2.52% ... right at its correlative WEEKLY S2/MONTHLY S1.

Jeff Bailey : 11/16/2006 3:31:57 PM

Bullish swing trade call raise stop alert ... for the United Parcel Service UPS Jan $75 Calls (UPS-AO) to $78.25 in the underlying

UPS $78.74 +1.06%

UPS-AO $4.80 x $4.90

Keene Little : 11/16/2006 3:26:09 PM

It'll be interesting to see if they peg SPX at 1400 at today's close. Not that it matters too much since it's the settled price the following day that matters for those options but it would be a good indication that the options activity around 1400 is what's influencing today's price.

Keene Little : 11/16/2006 3:21:47 PM

A buy program followed immediately with a selling spike. You can see what they're doing but it sure makes it tough to day trade this.

Jeff Bailey : 11/16/2006 3:19:45 PM

Buy Program Premium SPY $140.55 : YM 12,355 : OEX 652.40

Jeff Bailey : 11/16/2006 3:17:49 PM

03:00 Internals found at this Link

Keene Little : 11/16/2006 3:16:51 PM

ES 1406.25 is two equal legs up off the pullback so that might stop this here.

Keene Little : 11/16/2006 3:15:33 PM

Those buyers are persistent little buggers.

Keene Little : 11/16/2006 3:06:45 PM

It's certainly a market that's being held up. Either it's all options related or else the Boyz keep lifting it back and then selling into it. The pattern all day looks more like a distribution pattern than anything else. The RUT however continues to look more potentially bullish. Today's pullback, which could make a new daily low, looks like a nice little bull flag/horn.

Jeff Bailey : 11/16/2006 3:02:42 PM

03:00 Market Watch found at this Link

Keene Little : 11/16/2006 2:52:17 PM

The bounce is still choppy and should turn back down but I've seen so many of these choppy bounces suddenly take off to the upside that I have to wonder sometimes what's happening. Hmm, selling spike as I type so maybe the next leg down is coming. Watch for two equal legs down as a place to think about taking some profits on a short from the high (assuming of course we get another leg down).

Jeff Bailey : 11/16/2006 2:31:53 PM

UPS ... MONTHLY Pivot Levels ... $69.71, $72.53, Piv= $77.56, $77.56, $79.77

Jeff Bailey : 11/16/2006 2:28:44 PM

Don't know if we can get target of $79.50 today, tomorrow, but its an option expiration and you just never know for certain.

Keene Little : 11/16/2006 2:28:44 PM

So far the bounce is choppy which should mean another move lower. I've moved my stop down to breakeven at 1407.50. Can't hurt me now and I'll see how this progresses into the end of the day. Scalping is still the order of the day.

Jeff Bailey : 11/16/2006 2:27:40 PM

UPS $78.66 +0.96% ... might be on "the list" again today.

Jeff Bailey : 11/16/2006 2:26:40 PM

Buy Program Premium SPY $140.38 : YM 12,341 : OEX 651.56

Jeff Bailey : 11/16/2006 2:26:02 PM

AMTD $16.35 -0.12% Link ... "Max Pains" in $2.50 increments ... Nov= $15.00, Dec= $15.00, Jan07= $17.50

Jeff Bailey : 11/16/2006 2:21:06 PM

And how did these TWO stocks, in an EQUALLY WEIGHTED INDEX, perhaps give traders the idea that they should be putting the XBD.X?

Jeff Bailey : 11/16/2006 2:19:19 PM

Why have these TWO stocks not participated? What was the "news" that put a lid on nice gains, that overnight turned into a loss?

Jeff Bailey : 11/16/2006 2:15:59 PM

What is ONE stock, that trades in the VERY STRONG broker/WALLStreet group that hasn't participated. Maybe TWO stocks? What do they have in common?

Jeff Bailey : 11/16/2006 2:13:06 PM

In my opinion, the BEST trade on the bear side is to look for stocks, in sectors, with nice BEARISH vertical counts, that have NOT participated in the rally, that TRADE WITH OPTIONS (while volatility is low)

Jeff Bailey : 11/16/2006 2:05:57 PM

If you're thinking short DMC, I'm thinking the same. Juuuust be careful. Stock is relatively thin, short interest ratio 27.205

Keene Little : 11/16/2006 2:04:39 PM

ES 1404.50 is the uptrend line along the lows from yesterday afternoon, the bottom of its ascending wedge. A bounce from there would be logical. A break lower would be bearish.

Jeff Bailey : 11/16/2006 2:04:04 PM

I have al_rts set at each level of retracement.

Jeff Bailey : 11/16/2006 2:03:39 PM

Document Security (DMC) $9.28 -3.33% ... daily interval bar chart with retracement I put together the other night at this Link

Keene Little : 11/16/2006 2:00:49 PM

If you shorted that spike up (I liked it and shorted ES at 1407.50) then you should immediately move your stop down to a couple of ticks to a new daily high. I'm giving this market as little leeway as possible. As soon as we get a bounce, hopefully to a lower high, I'll lower my stop to just above the bounce.

Jeff Bailey : 11/16/2006 2:00:34 PM

Document Security Sys. (AMEX:DMC) $9.31 -3.02% Link ... a PROTection/Safety stock. No options though.

Earlier this week I noted Dorsey/Wright's sector bullish % reversed back LOWER for this sector.

Jeff Bailey : 11/16/2006 1:58:01 PM

C $50.69 ... isn't too far away from "Max Pain" $50.

Jeff Bailey : 11/16/2006 1:50:43 PM

And now ... The Expiring Option Exercise Manipulation Game brought to you by HL Camp & Company ... Link

Keene Little : 11/16/2006 1:49:48 PM

Just another run-of-the-mill jam job to the upside. But upside targets are now being hit for ES so be careful of at least short term topping here.

Jeff Bailey : 11/16/2006 1:41:29 PM

U.S. Oil Fund (USO) $51.30 -2.28% ... testing its WEEKLY S2 ($51.28)

Keene Little : 11/16/2006 1:34:16 PM

ES still has upside potential to 1407-1408 so that could drag YM higher.

Jeff Bailey : 11/16/2006 1:32:56 PM

I am not liking what I'm seeing out of ABX $28.93 -1.29% ... WEEKLY S1 $28.76.

Yesteray's morning's low was $28.77.

Keene Little : 11/16/2006 1:32:29 PM

There's a decent chance that the current leg up for the DOW is the last one. It has a pretty clean ascending wedge from yesterday afternoon and the top of it is near its upside projection at 12305 based on two equal legs up from November 3rd. If it looks good for a short (bearish divergences, etc.) at this level I'd give it a try. Just keep your stop relatively tight. We've seen how the afternoon rallies just keep going.

Jeff Bailey : 11/16/2006 1:28:14 PM

Following 12:58:45 post with HL Camp's program trading levels, and OEX stocks that were bought the most during yesterday's trade. Link

Jeff Bailey : 11/16/2006 1:18:34 PM

01:05 Internals found at this Link

Keene Little : 11/16/2006 1:16:28 PM

My alarm set at 29.50 for MSFT just went off. This is where it has reached the top of its up-channel that looks like a bear flag correction to its 2000-2002 decline. This looks like a good place for a long term short play for Mr. Softee as it is now overbought on its daily, weekly and monthly charts. This is its monthly chart: Link

Jeff Bailey : 11/16/2006 1:07:02 PM

01:05 Market Watch found at this Link

Jeff Bailey : 11/16/2006 1:01:58 PM

Now ... do YOU think "Max Pain" and options expiration is just about an index, or a tracker (QQQQ, SPY, DIA)?

Where an institutional trader, or house HAS to be focused on the YM/DIA, ES/SPY, NQ/QQQQ?

No, no, no!

How can an institution FOCUS a trade using certain stocks? What stocks have the MOST impact on an index?

Yep, the BIGGEST stocks of an index become a focus point.

Jeff Bailey : 11/16/2006 12:58:45 PM

Oh... the VXO.X is a volatility measure for the S&P 100 (just 100 stocks). The VIX.X is a broader volatility measure for the S&P 500 and provides a broader picture of what may be going on.

Jeff Bailey : 11/16/2006 12:57:28 PM

Top 30 Market Cap Weighted OEX Components at this Link

More than likely, these will also be the bulk of top weighted SPX/SPY components.

Those symbols with a ** denote Dow Indu. Components (remember, the INDU is a PRICE weighted index)

I've quickly added the "Max Pain" values of the top 10. Red= Max Pain below current trade. Green= Max Pain above current trade.

Blue arrows should solidify why FINANCIALS are so important to follow.

Keene Little : 11/16/2006 12:39:15 PM

A point I forgot to mention about the VIX when I posted its chart earlier (10:18) is that not only is the actual number low but the volatility around this number is also low. The Bollinger Band is getting very narrow. After a period of unusually low volatility, as measured by the BB, it's typically followed by an expansion of the volatility and it often happens quickly.

When the BB tightens you can never be sure which way it's going to break but in this case can we reasonably assume that the VIX is going to break down? I think not and therefore it's another sign that we should be prepared for a sudden burst to the upside in VIX which would very likely mean a break down in the stock market. Just more food for thought as we wait to find a top.

Jeff Bailey : 11/16/2006 12:28:51 PM

FNM $59.26 +0.28% ... "Max Pain" $60.00 ($5 increments)

Keene Little : 11/16/2006 12:28:16 PM

While the RUT gives me a bullish impression for today/tomorrow I get the opposite impression from SPX. As shown in this ES 10-min chart, if we see this continue to chop its way higher in what looks like a developing ascending wedge then we should only see a minor new high today before price starts a deeper pullback. By this pattern a high of 1407-1408 still looks like a good upside target. Link

Jeff Bailey : 11/16/2006 12:27:33 PM

NEM $45.10 -1.05% ... "Max Pain" $45.00 ($2.50 increments)

Jeff Bailey : 11/16/2006 12:26:46 PM

ABX $29.06 -0.85% ... "Max Pain" $30.00, $2.50 increments.

Jeff Bailey : 11/16/2006 12:25:55 PM

RHAT $16.57 -2.12% ... "Max Pain" $17.50 ($2.50 increments)

Jeff Bailey : 11/16/2006 12:24:48 PM

CDE $5.12 -1.34% ... "Max Pain" $5.00 ($2.50 increments) ... not much help, accuracy with increments are 50% away from the max pain strike. Get the feeling that those $5.01 lows have something to do with it though.

Jeff Bailey : 11/16/2006 12:22:49 PM

UPS $78.41 +0.64% ... "Max Pain" $75 ($5 increments) ... anyone wonder what may have taken place here the past couple of days? Not ALL can necessarily be attributed to option expiration, but some.

Jeff Bailey : 11/16/2006 12:20:49 PM

DIA "Max Pain" $120 ($1 increments)

Jeff Bailey : 11/16/2006 12:20:12 PM

QQQQ "Max Pain" now $43.00 ($1 increments)

Jeff Bailey : 11/16/2006 12:11:28 PM

Any action at the $44 strike? VXN 15.04 -2.33% (put selling/call buying)

Jeff Bailey : 11/16/2006 12:10:40 PM

QQQQ $44.24 +0.27% ... looks to leverage strength from DAILY Pivot ($44.14) and short-term downward trend that was broken just before noon.

Keene Little : 11/16/2006 12:10:12 PM

The RUT has a pretty clean pattern and that one suggests we're going to rally higher from here so heads up if you're short that index. We could see a further pullback but I'd be watchful for a new high on this one (especially if you're in Parnos' bear call spread). The upside Fib target by this pattern is near 799-804. Link

Jeff Bailey : 11/16/2006 12:07:02 PM

Philadelphia Fed: Input Price Pressures Continue To Moderate

Jeff Bailey : 11/16/2006 12:06:40 PM

Philadelphia Fed: Conditions 'Improved Slightly' In November

Jeff Bailey : 11/16/2006 12:03:56 PM

Philadelphia Fed Nov Business Index 5.1 Vs Oct -0.7

Philadelphia Fed Nov Business Index Expected 5

Nov Price Paid 26.7 Vs Oct 32.0

Nov Price Received 5.7 Vs Oct 17.8

Nov Employment 0.2 Vs Oct 9.4

New Orders -3.7 Vs Oct 13.4

Jeff Bailey : 11/16/2006 12:01:14 PM

Philadelphia Fed figures being released.

Jeff Bailey : 11/16/2006 11:58:58 AM

I'm pretty sure that was a "bad tick" on the SPY down to $139.49 at 10:56 AM EST, but QCharts hasn't yet corrected that trade.

Jeff Bailey : 11/16/2006 11:53:17 AM

BKS was one of the recent Soros holdings as of 09/30/06. (see 11/14/06 06:32:25 PM) Link

Jeff Bailey : 11/16/2006 11:50:59 AM

Barnes & Noble's 3Q Hit By Stock-Options Expenses

DJ- Barnes & Noble Inc. (BKS) expects to report a third-quarter loss, due mostly to stock-option expenses, the book retailer said Thursday.

New York-based Barnes & Noble disclosed preliminary results that showed a net loss of nearly $2.8 million, or 4 cents a share, for the quarter ended Oct. 28. A year ago, the company reported earnings of $327,000, or nil on a per-share basis.

Quarterly sales climbed 3% to $1.11 billion from last year's $1.08 billion, paced by 4% growth in Barnes & Noble store sales to $972.1 million, with comparable-store sales increasing 2%.

Stock-option expenses sapped results to the tune of 3 cents a share. Analysts polled by Thomson First Call have been looking for a loss 4 cents a share during the quarter, on average.

Barnes & Noble called the results preliminary, saying a special committee of directors is reviewing past stock-option granting practices. Final results will be released once the company determines whether its internal probe will affect results.

Shares of Barnes & Noble traded off 2.4% in recent action.

The company also said it expects fourth-quarter earnings to range between $1.86 and $1.96 a share, yielding full-year income of $2.20 to $2.30 a share. The First Call-derived average estimates stand at $1.95 and $2.27 a share, respectively.

Barnes & Noble said it expects the fourth-quarter and full-year income figures to be affected by stock-option expenses of 3 cents a share and 14 cents a share, respectively.

BKS $40.65 -4.64% Link

Jeff Bailey : 11/16/2006 11:46:18 AM

I get about 10 "legal" emails per day from Scott & Scott on a number of companies, just to keep abreast of what kind of stuff is going on.

Jeff Bailey : 11/16/2006 11:44:43 AM

Lehman Bros. (LEH) $75.60 +0.26% ... In last night's email, I did get an email from Scott & Scott Attorneys At Law that Lehman Bros. is being investigated on behalf of shareholders for insider financial and other manipulations that violate both federal and state law, as well as shareholder rights between, at a minimum, the time between July 2004 and August 2006, and likely spanning earlier dates.

I'm not certain, but this may explain why this institutional broker has been lagging the strength of BSC and GS.

Keene Little : 11/16/2006 11:41:28 AM

I'm not getting the sense that we're going to see anything other than a choppy consolidation today. That could mean a drop back down to yesterday afternoon's lows (or a little lower for NQ) and not mean anything. In the meantime if it instead chops its way higher then I'd continue to look for ES 1407-1408 for a high.

Jeff Bailey : 11/16/2006 11:23:40 AM

One of these days, that "pattern" will not repeat.

Jeff Bailey : 11/16/2006 11:21:27 AM

Kind'a crazy isn't it? Earlier this month (11/02/06) I noted that NASDAQ NH/NL inverted that day at 52:65 and that the pattern had been for reverting. On 10/3/06 NASDAQ NH/NL went inverted at 55:75, on 10/4/06 it went 102:81.

Jeff Bailey : 11/16/2006 11:18:19 AM

11:00 Internals found at this Link

NASDAQ's 10-day NH/NL ratio close to reversing back up to X at 76.00%.

Jeff Bailey : 11/16/2006 11:03:05 AM

11:00 Market Watch found at this Link

Jeff Bailey : 11/16/2006 10:59:43 AM

Current OPEN MM Profiles that I've made and Watch List at this Link

I separated the 1/2 CDE long position (1,000 shares/33 shares) as we may get "stuck" with 33 shares should CDE close above $5.00 on Friday.

The AGP-KG was officially closed out yesterday at $0.15. I'm keeping it on there for my own viewing pain, perhaps pleasure.

Keene Little : 11/16/2006 10:52:24 AM

ES looks like it's headed for gap closure at 1401.50. Watch for support there are at yesterday afternoon's low near 1400. We could be in for a choppy consolidation kind of day.

Jeff Bailey : 11/16/2006 10:44:59 AM

EIA Weekly Nat Gas Table Link ... Build of 5 Bcf

Keene Little : 11/16/2006 10:38:29 AM

Bonds have retraced all of their early morning spike up and then some. Yields are now higher than yesterday's close so the bond market has obviously rethought its opinion on the CPI data. But the stock market remains in lala land.

Jeff Bailey : 11/16/2006 10:29:40 AM

Ooooo... now, for every BUYER/SELLER, there has to be a SELLER/BUYER. Where is $141? OK, what is a level of potential intra-day resistance?

Jeff Bailey : 11/16/2006 10:27:02 AM

SPY 5-minute interval chart with QCharts' DAILY Pivot Levels at this Link

Keene Little : 11/16/2006 10:26:14 AM

ES's upside Fib target at 1406.75, possibly a retest of its pre-market high of 1408, holds good potential for a high today.

Keene Little : 11/16/2006 10:24:13 AM

If we can get a minor new high after this morning's pullback I'd look to short it. It would give us a nice little 5-wave move up from yesterday afternoon and it could set us up for a larger pullback.

Jeff Bailey : 11/16/2006 10:23:25 AM

Now ... what about this morning's SELLING of $141 Puts? Somebody (a person, a computer) was providing a selling influence (DnTicks were more than UpTicks) at $141 strike, for an AVERAGE of $0.81.

So ... RISK is $141 - $0.81 = $140.19 on that type of trade.

Jeff Bailey : 11/16/2006 10:18:43 AM

SPY 60-minute interval chart with WEEKLY/MONTHLY Pivot Levels at this Link

Earlier this month, after that test of MONTHLY Pivot, we CLOSED OUT (for a loss) the November $136 Puts on 11/06/06. I had been analyzing the SPY option montage, we "knew" where Max Pain was, and odds were in the favor of bullishness when MONTHLY Pivot held repeated tests.

Keene Little : 11/16/2006 10:18:40 AM

While the VIX is pressing its historical lows the VXN for the techs, just above 15, is not near its lows of 2005 near 12. But it's looking like it's ready to bounce off the bottom of its bullish descending wedge which would likely be bearish for stocks. The COMP chart I showed below (12:10 PM) says we should be closer to a top than a bottom so we've got the COMP and VXN in agreement--bulls are at risk here. Link

I've shown the VIX daily chart several times in the recent past and it's interesting how it continues to slide down the top of its wedge after breaking above it on November 1st. This is also bullish but we don't know when it will take off to the upside. It takes a break above 11.50 to give us a heads up that we just might have the start of the break down in stocks. Link

Jeff Bailey : 11/16/2006 10:07:49 AM

SPY Options Montage with open interest as of last night's close at this Link

Note: Volumes and up/down tick is CBOE activity only. See the notable selling of $141 puts in early trade? See where "Max Pain" of $137 is at? Who might be on the wrong side of an options trade?

Jeff Bailey : 11/16/2006 9:50:21 AM

Reader Question: I'm new , would you explain max pain at $137 on the SPY?

Reply: Yes . "Max Pain" is a theory that is mathematically derived from open interest on a particular security (in this case, the S&P Depository Receipts (SPY).

With option expiration this Friday (for the SPY), if we were to add up all of the contracts (put and call) for the SPY and the MONTH of November, a level of $137 would be derived.

Now, a couple of weeks ago, it was $136.

Traders will also note that the SPY options are in increments of $1 ($135, $136, $137 .. $140, $141)

The theory of "Max Pain" is just that, a theory. Sometimes it will hit darned close $0.50 either side, or right on!

"Max Pain" of $137 would equivalent to the SPY closing at $137 on Friday, in order to deliver "Max Pain" for the bulk of call and put holders.

Maximum Pain!

It can be helpful to monitor where Max Pain levels are at, but a trader also needs to understand, and follow what the VIX.X is doing (up, down) into an expiration.

I have tried to STRESS to traders not to read too much in VIX.X (S&P 500 Volatility). Some think a low VIX means "too bullish and sharp move lower is coming."

This isn't always true.

All the VIX.X does is attempt to measure the amount of bullish option activity versus bearish option activity.

Bullish option activity = call BUYING and/or put SELLING

Bearish option activity= call SELLING and/or put BUYING

What is taking place in November is very similar to what took place at September's and October's option expiration.

There have been some that have firmly believed, since early September, that the "low VIX" was a signal that a correction was/is coming, even into that expiration.

However, I've been trying to show traders over the years "why" the VIX might be falling, and the SPY rising. I am under the impression that a large number of traders SOLD CALLS NAKED (that is, sold calls without owning the underlying SPY) and as the SPY rises, traders are caught short and on the "wrong side of the trade" and feeling some pain. When that pain becomes too great, they either buy back those calls (has VIX falling) and even SELLING PUTS in order to try and get back to break even. Options market makers (even computers) will also turn to the futures market, or buy the SPY itself in order to hedge a NAKED CALL trade that gets too far in the money (in the money is an SPY $136 call, when the SPY trades $137, $138, $139...)

There are traders that ONLY sell options, in an attempt to take/capture the PREMIUMS from those option. If a security moves to far and against them, action is required to try and not blow up the account.

Options market makers are largely a SELLER of calls and puts (their job/purpose is to provide liquidity to buyers and sellers). They sell to open (when a willing buyer shows up, it is usually the market maker that has to take the other side unless somebody else is willing to sell to close a position), so that the larger number of option traders (like you and I) can buy them. BUYING and option, has that trader LIMITING their capital at risk. All a BUYER of a put, or call can lose is the amount of capital they invest in the option. However, a SELLER of an option can lose much more, thus they receive a PREMIUM when SELLING an option.

Keene Little : 11/16/2006 9:48:32 AM

NQ wasted no time closing its gap but it had a smaller one to deal with. It's now gone negative but I see the same possibility for the techs here--a consolidation or just this pullback and then press higher again. At this point it's looking like we could finish opex week at the highs. No real surprise there.

Keene Little : 11/16/2006 9:45:58 AM

At this morning's low VIX was only 10 cents away from going under 10.

Keene Little : 11/16/2006 9:40:59 AM

Another distinct possibility is that today will be a day of consolidation between yesterday's high, or thereabouts (we're there now), and the late afternoon low. This would be a bullish pattern with an expectation that we'll see another rally leg on Friday/Monday. This scenario would say we'll get gap closures today but not much lower. ES 1406.75 is two equal legs up from November 3rd and the pre-market high is 1408 so either could be resistance.

Keene Little : 11/16/2006 9:33:46 AM

Using the cash indices, two equal legs up from the November 3rd low are at DOW 12305 and SPX 1402.81. Those levels would make a good top for now.

Keene Little : 11/16/2006 9:21:27 AM

Big pre-market rally based on further expectations that the Fed will at least stay on the sidelines, if not reduce rates, as CPI fell 0.5% for the 2nd month in a row. Core CPI was down 0.1%. The core rate over the past 3 months has risen at a +2.3% rate which is still above the Fed's target of 1-2% but it's down from the +2.7% rate over the past year. CPI is up 1.3% over the past year while real weekly earnings (adjusted for inflation) are up 3.2%.

Obviously the stock market looks at this as bullish (what a surprise). Bond yields reacted with a quick drop but found support near the lows of this month and are bouncing back up. The pattern there suggests yields are finding a bottom here.

If I were to hazard a guess this morning as for what equities will do I'm thinking gap n crap. Maybe a push higher after the open and then let go. Just a guess but it would fit the pattern.

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