good morning all. as you can see, timing the "ripples" is very hard. the strength of the mkt is really seen today..
Subject: Tech Stock Options
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To: lisa (35095 )
From: donald sew Tuesday, Feb 17 1998 8:48AM EST
Reply # of 35108
INDEX OPTION
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The S&P FUTURES are up around 5 points this morning, probably due to the reaction to up markets in Europe this morning.
In light of Friday's performance, being down slightly in 27 of the 35 indexes I follow, the overall market is still in the overbought range but no longer CLASS 1 or CLASS 2 SELL status, which means that it can still go up. Per Friday's data most of the indexes showed reversal signals.
In light of this morning Futures being up in light of the short-term technicals being high in the overbought range, it is quite obvious that this market is a extremely hot and over-riding the technicals.
There has to be a small pullback soon(100-200) points, but the question is when. The highest probability was today, but it does not look that way so far. The next highest probability is this Friday, and then Mon-Tue of next week.
There is good probability that at the end of the month, the last 1-2 days could be the beginning of another short-term upswing which could account for another 100-400 up-DOW points.
Therefore the best chances for a pullback of 100-200 points sould be between today and next Tuedasy. Subjectively, In light of the huge strength in the market it would not surprise me that we do not get the 100-200 point drop, although the probability of such happening is extremely high, with the timing to be by next Tue latest.
Not that I am a BULL, but I am very bullish on the market for the short-term, and I am mentioning this pullback since many are looking for a window to get back into the market on the long side, as I am.
When/If there is a pullback of 100-200 points, that should be a good opportunity to get in.
As of right now feel that we could easily approach 8500-8600 range by the 2nd week of MAR. I am not counting off the possibility that we could hit 8500-8600 this week, just that the stronger possibility will be early MAR.
Technically, this market could get to the 8750-9000 range by the the 2nd week of April. That would depend also how the market interprets the earnings warnings which will start to come out early MAR. Of course there is other news items (IRAQ, CLINTON, ETC)
As for my personal trading I will wait for the small pullback to come first, since playing options all must be careful with time value decay. There will be a pullback definitely, but it could also be only 25-50 points, and just intraday, in this heated market. That would not be enough of a signal for me to get back into this market on the long side then I will just be patient on the sidelines and wait.
Keep in mind that I am playing just options right now, so this strategy is suited more for the option players who needs to contend with time-value-decay. As for stock players the strategy will be different in that if one feels that the market can move up to the 8500-8600 range soon, they can get in at anytime to avoid missing a runup in light of missing a small dip, and time is not of any strong concern as it is with options.
At this point, once the top is made, whether it is at 8500 or 9000 or even higher, expect a very strong pullback. Technically, with any strong runup the probability is very high that a sizeable pullback will occur, and as a rule of thumb I am using 1/2 of the runup.
This uptrend started at 7450 so if the top is 9000, whenever that happens, I will be looking at about a 700-800 point drop. It happened in April, and it happened in SEPT-OCT.
Seeya
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