This Page Last Updated: January 27, 1997 11PM
ANOTHER ATTABOY!!.........
Good evening traders and welcome back! Well today was another good day to trade. During my weekend commentary, I spoke of how little there was to support the OEX until it "approached" it's 20 day MA. This fact was bore out today as the OEX continued to decline until it hit an intraday low of 748.15 which was less than 2 points above the day's calculated 20 day MA of 746.36. Readers of this page are reminded that I recommended exiting short positions at OEX 749. By the closing bell the, OEX came to rest at 749.17. So far so good. Right? Well sort of..................
At the opening bell this morning the Prudent Trader got a case of "chicken little" and exited the OEXnl's just after the open to close out my position at 16 3/4's for a per contract profit of 3 pts. There was suscpicion we might bounce and since the Prudent Trader was "deep in slavery" and could not monitor the blow by blow, it was best to opt for maximum safety and tack down a 20% profit for the 6 1/2 trading hours the contracts were owned. Not bad all in all considering the circumstance.
Meanwhile, the Prudent Trader did follow through on his next plan of attack by going long the OEXbj's (Feb 750 calls) when the index hit 750.66 later that morning. Although, we had not touched the 20 day MA or "approached" sufficiently, the "slavery mode" was cramoping my style. In any event, the OEX did appear to come to rest in a range consistant with my weekend comments.
I now feel confident that a bounce will occurr by the end of Tuesdays trading session. We will either test the lows set Monday, which will now coincide with the calculated 20 day MA for Tuesday, OR we will spike lower in the morning, get a lot of people to go short and then whip saw them by days end.
THE TRAILING INDICATOR remains in a FULL SELL condition but now is not the time to be taking on fresh short positions! As per the rules of the Trailing Indicator, the 20 day MA is a resistance point that even the most bearish trader must respect.As mentioned in my weekend commentary, it is a special circumstance to be played despite the FULL SELL condition. At least for now, it will be supportive, but if we break it after a bounce, then play the break to the short side. But traders, that is several days away, and not in the cards for tomorrow.
Looking at the first generation technicals I refer you to the OEX chart. You will see that on Friday we broke below a supportive trendline (shown in dark cyan). Remember this: that trendline in concert with the 1st std deviation band will be the resistance point that will most likely send this index accellerating to the 50 day MA if it is not sufficiently penetrated on the next bounce. Also note the current 8 point distance between the 20 day MA and the 740 price point. 740 is a likely powerful support point. This is why I feel confident that within 3 or 4 days, the OEX will be higher than it was at the close Monday.
Because the Prudent Trader owns the OEXbj's at 17, a spike down to 740 with a negative tick will automatically send a signal to buy more bj's to dollar cost average the position. However, that's if and only if the 740 to 741 price point is "touched".
Looking to the second generation technicals, they look negative for any bounce to occurr, but don't be fooled. The Prudent Trader has been around too long to get sucked in by the obvious. Even though we are on a Full Sell signal, it's time for a bounce. The 1 caveat I have is the CRB Index. If it spikes again on Tuesday, an inflationary message may register with Wall Street, and I may delay dollar averaging the OEXbj's .
Until tomorrow, I hope you are having as much fun as I am.
Also, check out the improvement to my page, including an SPX chart for those who think in those terms
