Waiting for the big Kahuna Message Board

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Strategies & Market Trends : Waiting for the big Kahuna

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To: William H Huebl who wrote (43244)	8/29/1999 7:21:00 PM
From: paulmcg0	Read Replies (1) of 94695

I have been tinkering around with Mathcad this Sunday afternoon, mainly looking for stocks to buy puts on and tweaking my Black-Scholes model (with other statistical analysis). I find it amazing how the stock market is moving. For example, if you look at the Nasdaq 100 index ($NDX.X) for the last year, it looks like this: home.pacbell.net (The green line is a weighted moving average with more weight given to more recent values of the NDX.) I think the statistical analysis and models are starting to break down and don't reflect the true situation. For example, an analysis I did using the same data as in that chart, shows that the computer predicts only a 7.2% chance of the NDX dropping below 2000 before November options expiration. On the other hand, a lot of us think the market is grossly overpriced, and are expecting some sort of sharp drop, based on fundamentals and other reasons. Oh well -- I guess that will change the sigma (volatility) in the model...

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