I posted the following on a PMail this am to someone and think that some of the thoughts in that mail should be shared and hopefully commented on by others. Here is an edited version.
Right now I am somewhat at a loss as to where this market is headed. I bought puts at the 538 level in part because I wasn't going to be able to monitor the market as much as I would have liked and feel/felt a pull-back is in order. Hindsight being what it is says I should still be waiting to purchase. One of my distinct problems is the discipline of patience. I know this and must work on this more agressively if I am ever going to get good at this game.
However, the run yesterday and the potential for a run today could put us in trouble. Last time the OEX visited the 545 area was after Greenspeak. I felt at the time the market would go down after Greenspeak. Why? Because everyone expected it to go up. They felt he would not say anything to derail the markets, and he did not. However, since everyone felt it would go up, the smart money, in my opinion, bought the week prior...and if you examine the chart that was when we were below 525 on the OEX, so it makes sense whether or not it might be true. The OEX did rally after his talk about 5 points and I felt a gutt reaction to get short...but did not thinking this might be the true break-out. Missed 20 point downward move.
Now what is driving this market today? We have MSFT rally, mergers, and simply a move off of oversold areas. Any excuse will do right now. The MSFT thing I think is overblown on two fronts. First, the decision will be appealed. Again, MHO. Second, is Win 98 going to be as big a seller as Win 95? I doubt it. It is not a new operating system as Win 95 from Win 3.1 was. The OEM sales would have been there with Win 95 so it is a wash. Will the end line consumer jump to up-grade? Maybe, at least initially, but I think many are happy with Win 95 and the follow through won't be there. INTC is changing to drastic price cutting. This will hurt their bottom line. They also are
having trouble right now moving to their new and improved architectures. They are selling at very solid valuations historically for them. The PC market and its hardware components are becoming a commodity. Once a commodity the fat profits of the past disappear.
Finally, it seems that everyone is talking about a summer rally and this could be it. MSFT WIN 98 hits the streets, there will be good solid sales initially. That alone might drive this market for a couple of months even if the sales taper off. Does the fact that everyone is calling for a summer rally mean it won't occur? Of course not, it might. However, I think that we are due for a re-test of 8750 DOW and probably 520 OEX.
Can I convincingly say that anyone is in the clear with puts? Hell no. I do know that last month I lost money trading the OEX. Can you believe it? Me either. What a great month for a trader. However, I was influenced by outside sources concerning the OEX and did not follow my gutt. I bought a little too early and then sold near the top or the
bottom as the case may be in part because someone was telling me what crooks the OEX option pits were filled with and how premium was being stripped etc.....Well that is probably true, but the market turned and I would have made money had I held my original convictions. This time I am holding. A solid break and close above 550 would spell danger. Why 550? The 548 level is the old high. I think they may run this thing past the old highs a couple of points to suck in the bulls and have everyone say this is the real deal before they punch it in the gutt. The problem is, if you are in too early, like me, a run above 550 will leave little on the table.
I am holding for what it is worth. I beleive the market is still going to be volatile and I will be fine. However, note my post to Lisa this am. If this is a true break-out I can see the 5-day TRIN being under 4.0 for several days in a row. If that happens and is a true indication, then put holders could be in trouble.
My best.
-Scott |
