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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (65765)	2/8/2003 7:12:44 PM
From: mishedlo	Read Replies (3) \| Respond to of 209892

Max Pain thoughts on QQQ. Max Pain on QQQ is a solid 25, down from 26-27 earlier. Again, a dropping max pain is not a good thing if you are bullish. Key strikes are as follows. QQQ 23 19K calls vs 69K puts QQQ 24 53K calls vs 129K puts QQQ 25 146K calls vs 124K puts QQQ 26 129K calls vs 70K puts QQQ 27 84K calls vs 47K puts These numbers are interesting because they have changed in character a lot over the past couple of weeks. Profits have been taken on puts at 26 and 27 leaving a bunch of toasted calls stranded high. Even at QQQ 25, calls now outnumber puts. A rally here would probably be to the 24-25 area at most with 25 being enormous resistance. There are no huge obstacles below 24, so if things get ugly, there is no reason the bottom can not fall out. If the bottom does fall out, the spoos would possibly break support as well. Strong "option support" is at QQQ 24 and very hard "option resistance" is at QQQ 25 with 146K calls. We are nominally below QQQ 24 but a max pain target of 25 is really only a couple gap ups from happening. I would tend to think they try and hold QQQ to 24 or if we fall thru by a lot, a rally back to 24 would be attempted. Can they hold this mess of a tech wreck together for another two weeks? Possibly not. Perhaps we fall thru thru on the spoos as well and rally back to the QQQ 24 area and 825 area on the spoos by expiry from somewhere below. Someone will have a vested interest in holding these levels and delta hedging could make it ugly if they can not be held. Although there seems to be no buying, there does not seem to be much interest in selling either (based on volume). I would suggest that this is "option support" and not much else is holding up this market. If we are close to max pain thru Wed of this week (qqq 23.50 or higher), I would expect some "upgrades" of MSFT CSCO or INTC to kick in in an attempt to gap up the market and force things up. Time and time again, this has been the pattern and bears should at least be cautious of this happening. People mis-apply max pain all the time. It tends to work only when there is sufficient OI that some market maker cares about. Attempting to apply Max Pain to ELON or CREE or RMBS is usually pointless. Max pain works best if there is a minimum of 20K options at a single strike, and preferably at multiple strikes. Max pain on the QQQ has been the single most reliable strike month in and month out. It also has the most options to expire worthless. M