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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 652.53-1.5%Nov 20 4:00 PM EST
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To: HairBall who wrote (29515)10/14/1999 6:13:00 AM
From: Dave Shares  Read Replies (1) of 99985
 
Dear LG,

I have been lurking on this excellent thread for a while.

I have a more hypothetical type of question to put out there for consideration of the market veterans (unlike myself) here.

I am using Point and Figure charting. One of the things that Tom Dorsey wrote about in his book that has stayed with me is his description of the October, 1987 drop in the market. It happened on the Monday after expiration, and Tom said in his book (or at least this is MY interpretation) that put selling had gotten really out of hand, and that many puts did not expire worthless at expiration which exposed the put sellers, which I would assume are mainly the big players on Wall Street.

Seeing some of the action of recent weeks, and seeing on some indexs that the max pain is above current levels, I can only wonder if this phenomenon of 1987 could reoccur in the present time, or are there better hedges in place to avoid this.

As a neophyte in the world of market analysis, I have no idea whether this is something to be concerned about, but it makes me wonder..... I am only partially invested at this time and hold Jan QQQ puts for defensive purposes, as the main indicators for P&F are negative at this time.

Thanks for the opportunity to share this here, and thanks for all the good work done.

David

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