This Page Last Update: January 23, 1997 10:30PM
Good evening and welcome back traders. Some times, but not often , I will give my self an "attaboy" and that will be enough to keep me doing this page. Two days ago I commented that all was not well in OEX land. If you remember I had remarked that the index's 20 day MA had reached the price point of the previous peak. You have now seen a "deaner pearl" in action! Yesterday, I outlined a secnario that would begin the retreat of this index to the 20 day MA. I am proud to report tonight that "IT IS NOW SOUP TIME"!
That's right, the markets condition officially switched to a FULL SELL signal with the late afternoon sell off today. As warned yesterday, the McCellan Oscillator went negative, the Summation Index turned over, and the Trialing Indicator bypassed the Neutrality condition as predicted.
So the $64,000 deaner question- What do I do now? TECHNICALLY SPEAKING, the OEX is not on the ropes by any means. Since the OEX went into an extreme negative tick, and since the index is hovering just above the 1st standard deviation band at aound 760, a temporary bounce is in order. I suspect a 50 % retracement back to the 668 or 770 area is a good bet. From there I will be scoping my shorting opportunity. I will be looking at volume, the A/D line and the relative performance of the OEX to the DOW for intraday direction. I may pull the trigger sooner (ie. at a lower price point) if all does not look well. If you look at the OEX chart you will see that the last 2 FULL SELL conditions saw very little bounce the following mornings when the signals were generated. The Prudent Trader intends to wait until 10:AM eastern to size up the situation before going short.
But HASTE MAKES WASTE and a bounce with "GOOD QUALITY" to it could very easily swith the market condition to NEUTRALITY. Remember, the Prudent Trader does not necessarily have to trade this signal immediately.
The downside target is most definately the 20day simple MA. Since it is rising roughly 2 points each day, tomorrows price point is roughly the 747 range. BECAUSE OF THE DYNAMIC POWER that this bull market harnesses, the Prudent Trader intends to bail when the 20 day MA is "approached" NOT "touched". I will be saving some for the fish, you can be sure. That means if tomorrow we get to the 748 to 749 range, I'll be cashing out my position if I'm short. I will mentally recalculate my exit strategy daily for this 1st leg down.
LET ME GO ON RECORD.....by saying that if the 20 day MA is reached on a closing basis, the 50 day MA will be prbably reached after the preceeding bounce. The deaner smells the "Deaner Indicator" in it's embyonic stages. (For those of you not familiar with it, I will post it's own page next week. Currently it's under construction).
Three final points:
1) If I miss the move down because of a "tight scenario" that doesn't materialize, SO BE IT! The 20 day MA will be a VERY EXCELLENT buying opportunity.
2) Going short at the higher price point will ensure a 10+ point run to the downside in the index once I enter mya short position. This fits my criteria for holding an OEX option.
3) Because the market is the result of "collective psychology", what will happen when the NEW ENGLAND PATRIOT's win the super bowl sunday?
Think about it and have a pleasant day tomorrow.
post script: Not much technical babble to speak about tonight regarding the OEX, but the XAU...that's another story!
