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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: BDR who wrote (3335)	1/24/2002 8:59:14 PM
From: FaultLine	Read Replies (1) \| Respond to of 5205

I realize that raising the issue of buying a straddle is risking the wrath of the old farts of the thread (dUF and dFL), but in times of low option premiums what are we going to talk about?(g) the playoffs...? wine...? digital photography...? foreign affairs (the other kind)...? --dfl@yourmove.com

To: BDR who wrote (3335)	1/25/2002 5:24:53 PM
From: BDR	Read Replies (2) \| Respond to of 5205

McMillan's weekly commentary (with the usual FWIWs and caveats): Market Commentary Thursday, January 24th, 2002 A number of our indicators leaned to the sell side in the past couple of weeks. They will be described momentarily. First, though, let me point out that the seasonally bullish January Seasonal period is upon us, so traders may want to wait for that short-term bullish period to pass before establishing any bearish positions, in line with the indicators. Note that it is completely logical for the indicators to be on "sells" while the short-term seasonal is a buy. That's because the indicators are longer-term items -- generally only giving 6 to 8 signals per year. The put-call ratios are still not giving any convincing signals. The "normal" equity-only ratio is barely beginning to decline and that's a budding buy signal. The breakdown of that ratio into its NYSE and NASD components shows that they are both now on buy signals as well. The weighted put-call ratio is still going sideways, though -- not indicating any clear direction at all. As for other broad market put-call ratios, there are other recent buy signals from both the normal and weighted ratios on the S&P 500 futures options. Meanwhile, the weighted ratios in $OEX, $NDX and QQQ all remain on sell signals. Meanwhile, volatility ($VIX) is hovering near 25. It is above its lows. When $VIX makes a low, that is often bearish for the market in general, and that low more or less coincided with the recent market top. However, our other volatility measure (using the options of the stocks that comprise $OEX) is at a new post-September low. It is a truer measure in this case, I believe, and is telling us that option buyers are in retreat and sellers are confident -- a situation which usually leads to a (downside) explosion. Finally, the consideration of prices is important, too. $OEX previously turned down from the 600 level. That resistance level is still a most significant point, especially since the 200-day moving average continues to remain at about that level, too. Until $OEX can climb above that level (and $SPX can climb above the 1170 level), there is no reason to hold a long-term bullish opinion. From a longer-term view, there is a very good trading rule that says major market bottoms are made in the mid-year of the Presidential cycle. That's this year, 2002. So, sometime this year I would expect a major bottom to occur -- one that could last 12 to 24 months. From a sentiment viewpoint, though, the market would confound the most people (which is what it usually does) by violating last September's lows before eventually making that bottom. So, that's what I expect a new low for this bear market sometime later this year, followed by a new bull market. I don't think that's a very widespread viewpoint, which is why I like it. I also think it makes sense, because everyone being interviewed on TV assures us that September was the bottom. What are they going to do or say if it wasn't? Probably dump everything just as the real bottom is being made. Hopefully, our usual indicators will guide us through this process, for we don't make trading decisions based on a "macro" view such as this.