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Strategies & Market Trends : Options

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To: Jill who wrote (7072)	4/30/2000 1:08:00 PM
From: Poet	Read Replies (1) of 8096

Hi thread: I haven't caught up here in a few days and promise to this evening when my kids go back to school. In the meantime, here's another thoughtful editorial from today's Option Investor newsletter: The Nasdaq finally confirmed the +3800 break a week ago Thursday with a close over 3800 on Friday. This is the first step in the bullish scenario of establishing a higher high. The higher lows set on the 17th, 24th and 27th are a positive sign as well. With the Dow still suffering ECI sticker shock the Nasdaq is having to go it alone. The Dow is drifting downward with the next support at 10650, about 90 points away, but the next support after that is under 10400. We know from previous experience that a continued divergence of the two indexes will eventually drag on the one moving upward. Just look at April 12th for confirmation of this. Where normally I would be very bullish today based on the higher close over 3800 I am still suspicious of the rally. There are many good signs like the number of 52 week lows dropping and advances strongly over declines. Even though the Dow was down -154 on Friday the NYSE advancers beat decliners by +415 issues. If this was May-17th I would be screaming buy but with the Fed ahead there is still a possibility of another dip between now and then. Many, many Nasdaq stocks have had some huge gains since the April 14th drop. PMCS for instance has gained over $70, AMCC +$50 and neither has had any serious profit taking. The bounce on many of the leaders has been very strong and many investors may be leery of taking a position until there is some profit taking. The market is still not healthy even though the Nasdaq is making good strides. 30-40 Initial Public Offerings have been cancelled and many others are waiting for market strength to return before setting dates. Cash is still on the sidelines but it is not rushing into the battle. The higher the Nasdaq leaders go the more resistance we will see. The "if only it gets back to $xxx I can sell and get my money back" concept is alive and well. Investors down -20%, -30%, -50% are all cussing themselves for not selling when the drop began and they are making promises to their creator, themselves and their wives about what they will do "if only" they get their money back. This creeping resistance will be with us for sometime and could cause a lot of aggravation in the form of failed rallies in the future. I really hate to keep repeating this but over 80% of companies have reported earnings already. If the Nasdaq was not already so far down we would be at the historical post earnings sell off point. The only thing that will move the markets up next week is the fear that the sell off was overdone and the train is about to leave the station. A lot of traders will be looking at the Nasdaq chart this weekend and pointing to the close over 3800 as the confirmation trigger. A positive open on Monday could be the spark that we need. If we fall back under 3800 the money on the sidelines will breathe a sigh of relief and start plotting entry points for a post Fed rally. If the Nasdaq moves up strongly on Monday and posts another higher high then money will start flowing. It is simply a technical and sentiment trigger coming together at the same point and the results could be incredible. That is my bullish side hoping the rally has begun. My bearish side is still looking at the dozen or so economic reports before the Fed meeting and telling me to wait patiently. You never lose money in cash. Our challenge is to ignore what our biases and emotions are trying to tell us and simply trade what the market gives us. If you are bullish and the market is trending down you will repeat the April losses. A simple indicator for us next week would be - go long if the Nasdaq is over 3800 and go short or flat if the Nasdaq is under 3800. Your decision process is over. All you have to do is execute.

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