The overall market moved sharply lower on Friday. And from the
looks of things it is likely to continue, at least for a little while. In speaking
with people on Friday, the often cited reason for the market downturn is the increased
likelihood of war with Iraq. Personally, I don't buy it. I do not think the chances
of war with Iraq has increased dramatically in the last week. I think they are
the same as they have always been, pretty much a sure thing. I don't think anyone
seriously thought that Saddam Hussein would comply with the U.N. resolutions.
What has changed, is that our supposed allies are pursuing their own separate
agendas which primarily is either focussed on short term money into their own
pockets (i.e.. Economies) or maintaining their own authoritative regimes. I have
heard absolutely nothing from them that speaks of the protection of innocent people
from terrorism or ending the suffering of the Iraqi people. What I think is impacting
the market, is the fact that trade with our allies will suffer if they are not
supportive of the upcoming war with Iraq.
(GE) closed Friday at $23.06 In doing so it broke through support at $23.60 that
was established in mid-November. I have been watching GE since the current market
began its pullback for an opportunity to sell either the $22.50 or $25.00 February
Puts. Friday the Feb. $22.50 puts closed at $0.75 and the $25.00 Puts closed at
$2.20 I am expecting GE to continue to move lower and test $22.60, the point from
which it gapped higher in early October of last year. If it closes below this
level then I would expect GE to test $22.00 per share. If GE reaches $22.60 per
share and the February $22.50 Puts are trading above $1.25 per contract then I
would look to sell the February $22.50 Puts to generate cash and possibly acquire
GE with a cost basis of $21.25/share.
This would be an opportunity
to acquire GE at a price not seen since late 1997. On the other hand, if the price
of GE rises then the puts can be bought back or allowed to expire worthless. Something
to defiantly be considered if the February $25 Puts are sold, since I consider
them to be more of a trading opportunity and less of an acquisition method.
The Dow Jones Industrial Average:
Dow Jones Industrial Average closed Friday at 8,131.01 down 238.46 points. The
Dow Jones Industrial Average broke through a couple of levels of support since
the Sell Signal was generated on January 16th. The Dow Jones should continue to
move lower and test 8,043.63 In looking at the chart of the Dow Jones Industrial
Average, the is not a pattern of multiple points of support established to provide
a clear indication as to where the current downward trend will find support. There
are a couple of minor points of support near the 8,000 level. Otherwise there
is not a clear connection between the couple points of support at lower levels.
The Bottom Line: I expect the Dow to test the 8,000 level.
The S&P 500 closed Friday at 861.40 down
25.94 points. The S&P 500 should continue to move lower and test 854.95 This
is a minor level of support in my opinion and the odds are that the S&P 500
will continue to move lower and fill the gap at 841.44 that was created when the
index gapped higher on October 15th of last year.
NASDAQ 100 (NDX)
The NASDAQ 100 (NDX) closed Friday @ 996.18
down 36.49 points. I am expecting the NDX to continue to move lower and test 980.36
and then 972.48 In looking at the chart of the NDX today, it occurred to me that
there are numerous gaps all over the place. Therefore, it's reasonable to expect
that the NDX will eventually move lower and fill those gaps. In short this index
isn't out of the woods yet.
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