It Will Be Interesting

Of course, the market opened with an exhaustive gap up to 10,100 theoretical Dow by 10 a.m., and then began hesitating. This was the perfect day for trading,as we saw light futures, no bias, and traders were able to buy the Nov 490P at best buy of 5.20, to highs of 10.00 by early afternoon. This was an easy trade. At the same time, traders had no time to enter on the call, as it rose in a fast gap up, and held.
Yesterday was the perfect OEX profit, with every rule intact! Returns of 40% plus were easy.

It might be harder today. There are struggles at 9800, but the market wants to go much lower. Earnings should look good for many reporting, and housing starts may appear falsely "up."
It will be interesting to see if the consolidation will hold.


Many market makers believe the market is now not only oversold, but overpriced, and that equities will suffer, despite what have been good earnings so far. Part of this is that Wall Street and companies set easy earning expectations because of the financial debacle, but earning analysts are now "pricing performance, not just cutbacks" into their future earnings projections.

The bottom line: this will make it harder for companies living on their growth by "restructuring" to sustain that growth, and that earnings expectations will be much higher.


Long term trader Bill D is actively studying and analyzing with us, and I have been attaching many of his charts recently. Here's how this Advanced Mentoring student is thinking and working:

"This all started because I wanted to keep track of the count from day to day on a number of strikes. Your bell curve analysis is based on the $2-3 option. Well since that changes from day to day and you need data from 3 days prior I figured I'd keep it in a spreadsheet and update daily. Takes all of 3 minutes I think. I use "Thinkorswim" nice platform.

Well just for shiggles I decided to throw it on a chart to see what it looked like. Followed it a couple days and decided to share.

My first thought is, the 475 put stuck out like a sore thumb the day before the big afternoon selloff. Could this be a leading indicator by identifying a strike that is becoming active?

Why/how does your count system work, because of demand. Logic will show, well the math will show that based on the bell curve count parameters demand "should" create an increase in price and the count method should indentify the most demand for an issue because it happens over a number of days. The proprietary systems identify most actives on a daily basis. I think the count system takes that a step further by using the 3 previous days close its not a one and done thing it is a potential trend.

By tracking all strikes on both sides the $2 option is always on the chart.

So first off, we can identify a specific strike in a string that is increasing in daily closing price.

Next is the bias. The day after option expiration both chains were flat although the calls were running on the 6 line and the puts were running on the 3 line, which indicated to me that there wasn't a clear bias either way but something might be up. It also might have been because of option expiration. Don't know that one yet.

The next two days were where the movement was and when the 475 Put started to show its bias and a possible change in the short term trend. The markets ended down for the week and the put string was running a higher count than the call string.

The one thing I've noticed when copying the data is the put prices are usually more uniform than the call prices.

I think it is just another way to identify the most active issue in the string. The caveot is the bias. We'll see how this works, need more time."