ES Journal Archive (2009 - 2010)

jeb9999 · Mar 12, 2009

Quote from Bootsie:

That's great, but the last time I checked we were in a bear market. Any comments ?

B

Bear market rallies tend to be sharp and short and often look better than bull maket rallies.

That is what happens when the shorts get squeezed and bargain hunters jump in on the move up. When the buying drys up it is back to the main trend going down. Just watch out for the real bottom.

swing-scalper · Mar 12, 2009

Quote from opt789:

Don't know if you found what you were looking for, but here is my previous answer to your question.

There is a relatively simple arbitrage relationship between ES and the cash SPX. It is a function of just interest rates and dividends. The simple way to look at it is that you could buy all the stocks in the SPX in the correct numbers to mimic the index but that would cost you the interest you would earn by not investing, and on the plus side you would receive dividends. As apposed to the ES which has a much smaller cash requirement but you donât get the dividends. Therefore the fair value of ES to SPX is interest minus dividends which is all explained here http://www.indexarb.com/fairValueDecomposition.html

With interest rates so low the dividends outweigh them and we are in a period of negative fair value. These calculations are just simple mathematics, there is no information gained bullish or bearish from these numbers.

Clear enough. Thanks.

Bootsie · Mar 12, 2009

Quote from jeb9999:

Bear market rallies tend to be sharp and short and often look better than bull maket rallies.

That is what happens when the shorts get squeezed and bargain hunters jump in on the move up. When the buying drys up it is back to the main trend going down. Just watch out for the real bottom.

Thanks... my point is that this type of move up is classic bear market rally... imho.

Jahajee · Mar 12, 2009

Quote from Bootsie:

That's great, but the last time I checked we were in a bear market. Any comments ?

B

Bear market for the last 16 months approx.
Either is another bear market rally that peters out at
one of the major resistance points - 800, 820, 865, 920, 950, 1000... then resume predominant bear trend to test lows.

or else it is the end of the bear market with one of the
following -
up to sideways for a few months, very frustrating to trade
or v-reversal bull market

No way a bull market is born in the current environment so I forecast a bear market rally that could end at about last week of March into early April to coincide with Q1 earnings.

Which leaves is with the option of a low volatile range-bound market with daily ATR below 15. going nowhere during the next 4 months or longer, until the September/October period.

Jahajee · Mar 12, 2009

Quote from swing-scalper:

Clear enough. Thanks.

the fact is in bear markets, futures are near or below cash SPX
and in bull markets, premiums are fat, even as high as +15 or higher! Check the dot com boom days in early to mid 2000.

June ES is about 6 below cash SPX. That's bearish. of course, in bearish markets interest rates are low (as low as zero!) so preimum can be negative, like now.

Bootsie · Mar 12, 2009

Quote from Jahajee:

Which leaves is with the option of a low volatile range-bound market with daily ATR below 15. going nowhere during the next 4 months or longer, until the September/October period. [/B]

thx... and the most probable in my opinion. We replay the Nov. to Feb stretch with a more consolidated move and then end up at 500/450... take your pick.

Lotta "if, then senario's" ... just playing around.

B

iloveoptions · Mar 12, 2009

Quote from fseitun:

Let me get this straight: what do you mean by "enough staying power"?

Does 998 represent an eventual margin call by the broker?

If yes, why would you be willing to piss it all away on a single trade?

I may have misunderstood, so please explain.

If I do nothing from now till then, yes, I will receive a margin call. While it is possible to hit 998 by the end of next week, the odds of it are quite remote. T-6 for OE day.

The odds of touching 730 are much greater than 998 in 6 days, at least that's what I think.

tommymoose · Mar 12, 2009

check out the open interest on those 85.00 march spy calls. I don't read into this stuff too much (since I've never done much analysis of it), but that's my main target.

iloveoptions · Mar 12, 2009

Quote from tommymoose:

check out the open interest on those 85.00 march spy calls. I don't read into this stuff too much (since I've never done much analysis of it), but that's my main target.

If you're talking to me, that's a very high target in 6 days. Like you said, you don't read too much into it and you shouldn't. Since anything and everything is possible in this market as we're at the mercy of news, I wish you the best of luck getting it by next Friday

tommymoose · Mar 12, 2009

Quote from iloveoptions:

If you're talking to me, that's a very high target in 6 days. Like you said, you don't read too much into it and you shouldn't. Since anything and everything is possible in this market as we're at the mercy of news, I wish you the best of luck getting it by next Friday

I don't think its probable in 6 days either.

I definitely wouldn't rule it out though. Look at the rate (price vs time) in which bear market rallies moved in the 2000-2003 period compared to the overall rate of the bear market. If you consider the rate at which this current bear market has unfolded, a rally of that magnitude in a short amount of time is not too hard to imagine.