Thursday, October 14, 2010

Option week games.

SPX opened gap up and after a quick small pull back it went on and on and on finally making high of the day little after 11.00 a.m at 1184 from then on it did a  mild pull back all the way into close.  Low just before close was 1177 and that was at 50% of the day's gain.Yesterday's close was 1170 rounded.    This in itself if negative for the tomorrow.  RUT did a lot better it only gave up 5 points or 1/3 of the gain of 15  points.  The reason for today's rally was JPM's earnings but JPM ended up negative for the day.  
The first chart on the left is that of daily FAS. After being flat and in a wedgie pattern it  finally broke out to the up side.  If the move is not a fake and FAS can keep it up for a few points it could be a game changer.  It would be tough for the markets to come down if the major financial institutions are rallying.  I plan on watching this a little more keenly than in the past.   
The next one is daily TNA.  It is in a very narrow channel.  It is almost at the same rate of ascend as it did from 5th Feb. this year.  It corrects swiftly for one to 3 days to get to the bottom of the channel and then TNA continues the rally.  In the Feb. rally TNA was up continuously and then a flat correction for for 6/7 days.  None the less we are relatively (23 points from low) at the same spot we were before.  We are getting quite close to the top of the channel and a pull back should happen any time.  
The last chart is daily TZA.  It is looking very sorry but there may be light at the end of this drop.  For all I know we may have made a bottom in it today.  The chart says TZA is at a critical point It is right on the median a common spot to reverse and rally to the top of the channel.  Any thing lower of significance would send TZA to the bottom of the channel and the market much higher than where we are currently. 
In my earlier blogs I made a cse for the SPX to make a top around 1195 we are not very far from that.  I plan to intensely watch that.
Almost in every last week of option expiration week there is a day when the markets rally blindly.  Clearly on this day the puts should be covered at very low prices and calls should be sold at very high prices.
Having done that next event is for the markets to drop heavily so the reverse can be initiated.  We have done the big up day and have been going up (TNA) for 4 days in a row.  It wouldn't surprise me to see this market drop quickly and a lot of points.  I will play from my signals but am really waiting to short.

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