A very heavy day for the markets, especially techs. Where is the next support? Very close at this point. Let's turn to the SOX. 200 day moving average is at 491.64, we closed right above at 495.50. If we get one more flush tomorrow, expect that level (491.50) to produce at least a bounce. As for the COMP, we are fast approaching 61.8% 2006 support at 2260.79. Another level of support that should come into play. QQQQ bounced off of 200 dma, but it might be more accurate to look at NDX which has its 200 dma at 1650 (close was 1657.48).
I expect maybe one more push down and then we should rally next week, maybe even at the close tomorrow. The reason I think we will rally is because of the inordinate amount of puts sitting at QQQQ 41 May strike, set to expire next Friday. A staggering 5.1 put to call ratio with 400K puts to 87K calls. Understand that opex players will do everything, and I mean everything to pull us up above 41. Since we have a 1.20 pc ratio at the 42 strike, there is a very good chance the rally will take us up to 42 again. This is not set in stone of course, but I have learned over the years to never underestimate the power of option expiration week. After that, your guess is as good as mine.
Inflation fears, bla bla bla, all that talk is meaningless. Energy is a tax and will slow the economy, thus hampering any ability to raise prices to the point that gold hysterics are forecasting. In fact, I now see very good reasons for the Feds to stop right here. Oil should drop, setting the stage for a rally next week. That is my optimistic scenario. The worst case? Opex players can't control the selling and they have to cover their puts by going short, adding to the misery and possibly creating a crash. I doubt it, but I do have to make you aware of this before you go out and break the bank. I think we rally next week, but play it safe, please.
This entry was posted
on Thursday, May 11, 2006 at 5:26 PM.
