Subj : Market Action
To   : All
From : Paul Rogers
Date : Fri Jun 17 2005 06:04 pm

Content-type: text/plain

John caught my error about the extent of current inflation compounded
over the next four years.  1.01^48 is indeed 1.612, over 60%, but the
core inflation rate isn't 1%--it's 0.1% and 1.001^48 is 1.049, or just
over 4.9%.  Usually my "numerical sense" is better than that.  Thanks
John.  OK, on to current affairs.

UoM's Consumer Confidence index took an unexpected jump this month, and
that seemed like good news, since the consumer is about 2/3 of the
economy.  If the consumer feels better than everybody expected, then
maybe the economy will pick up more than expected too.  The market
jumped at the open and held on all day to close up 6pts (around 13.2
would be significant), in spite of oil ALSO jumping $2.02 intraday to a
new high of $58.60/bbl.  But you know I keep preaching about volume.
Volume was up +33% above average.

There's an exception to every rule, and it came into play today.  Third
Fridays are when options and futures expire, and this being June, today
was one of the "quadruple witching days", when 1, 2, & 3 month options
expire as well as futures.  Not always, but usually that leads to lots
of volume.  Why, when they're options and futures?  Well, sometimes
options are exercised.  But it's not so well known that by combining
buying and selling of puts and calls in just the right way you can
create a position that has the same short-term risk/reward position as
an underlying stock, but the cost of a couple options contracts.  In
effect what this does is create stock out of thin air, for a while, and
it doesn't show up on the NYSE volume.  Why buy stock then?  This
position evaporates some amount as the options progress to expiration.
Still, the way the Street plays the game, the dividing line between
stocks and options gets a little fuzzy at times.

So, I'd discount this volume figure by a lot today.  I suspect there was
a bit of short-covering today too.  In any event we're above my
resistance line.  It remains to be seen if the market can hold it.  I
wouldn't be surprized to see some more excitement here, but then I also
wouldn't be surprized to see evidence the Street suddenly got "cold
feet".  Let's wait and see what happens next week on the followthrough.

By the way.  The options expire today, but that means "on the Street".
Things may have speeded up a bit in recent years with all the
computerized networking, but the traditional order of things has been:
your broker had to clear all his positions yesterday, which means we had
to clear all ours on Wednesday so they could all get to the Street
today.  Never wait till the last minute on options positions.  When the
gong sounds your "in the money" options go POOF!

 Price    Vola-    Momen-   Volume   Oscil-   Summ.
 Change   tility   tum               lator    Index
 -__+     -__+     -__+     -__+     -__+     -__+

 __|_     _<__     __|_     _<__     __|_     ___>     06/13
 __|_     <___     __|_     _<__     __|_     ___>     06/14
 __|_     <___     __|_     __<_     __|_     ___>     06/15
 __>_     <___     __|_     _<__     __>_     ___>     06/16
 __>_     <___     __|_     ___<     __>_     ___>     06/17

Timing Signals:  I don't use or recommend timing signals, but they're
fun to watch.  If I did though, well, I might use something like this.
(Be warned!!  It tends to whipsaw around signal points!)

Last Signal: BUY        Date:  05/17/05 S&P:    1173
Winner or Loser:  tbd                   By:     tbd

See my market tracking charts for '03-'04 and my investment strategy
study at my website(s):
http://www.xprt.net/~pgrogers/Pers.html
http://www.geocities.com/paulgrogers/Pers.html



Paul Rogers, paulgrogers@yahoo.com                       -o)
http://www.angelfire.com/or/paulrogers                   /\\
Rogers' Second Law: Everything you do communicates.     _\_V

.... Cat (KAT') n. Dog with an attitude problem
___ MultiMail/MS-DOS v0.35

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 * Origin: The Bare Bones BBS (1:105/360)

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