In Monday’s edition we stated that both the IYE and XLE had proved the point and if you were so inclined to be short would be a good position. We show those in the examples today. The more you listen to the news the more you will be wrong, especially in commodities. There is always the big lie about its different this time. It’s never different.

George Soros. “All of economic history is one lie and deceit after another. Your job as a speculator is to get on when the lie is being propagated and then get off before it is discovered.

The lowest price and highest price in expiration is generally the Wednesday afternoon before Expiration Friday. In the chart today where we compare the curve of winning positions in puts and calls on the SPY we see that there is half a billion dollars in calls to be paid out if the SPY expires on Fridays close at this price. The standard deviation for this is about 2 points either side of this number pointing to a expiration in the 84 to 88 range. While not a perfect indicator, expiring with this much on the table rarely happens. About one in 10 times at today’s close. This number can track in with a big move, sellers of calls today can drastically drop the price and raise the options expiration curve and put it back in the normal range. In any case if, we were short term trading we would cover today on any spike down.

In the examples today we also toot our own horn and recap the last week or so and update the results of our charts. Most of what we do in Proving the Point is show setups for automatic rally’s and failures. These normally are very quick to produce fruit. If they don’t turn in three days you should probably move on.

Examples:

Understanding Examples:

Examples shown are starting points for looking for a trade. The market, sector and stock should all be telling the same story to enter a trade. An example of a stock is just 25% of the story, you still need to get the broad market (50%) and sector (25%) to line up. SOS stands for “sign of strength”, a big candle (big price change) where volume is significantly higher and instantly stands out on the chart.

Newsletter Information:

Proving the Point is published each trading day exclusive of the last two weeks of August and December. Questions can be addressed to help@ord-oracle.com. The term “Proving the Point” comes from a term coined by the original evangelist of price and volume trading, Richard Wyckoff. The term refers to when a stock goes through a previous swing point with significantly less volume and pops back into the trading range defined by the previous swings. It has proved the point that there was no demand for higher prices or supply for lower prices, at that time. Our mission to show and diagram the most likely changes in direction based on price and volume movements.

Signals are provided as general information only and are not investment recommendations. You are responsible for your own investment decisions. Past performance does not guarantee future performance. Opinions are based on historical research and data believed reliable, there is no guarantee results will be profitable. Not responsible for errors or omissions. We may or may not invest in the vehicles mentioned above. Copyright 2009 The Ord Oracle.