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INDEX OPTION TRADING


OEX Monitors The Market

01/15/02 10:26:41 AM
by Austin Passamonte

The S&P 100 Index [OEX] is a great tool for measuring broad market action. Here's a look at some recent technical developments within the OEX.

Security:   OEX
Position:   N/A

If I were limited to watching just one symbol for broad market action as a proxy, it would certainly be the S&P 100 index. While this market was overlooked by most of the late 1990s crowd, it was once the most popular option vehicle traded. It has regained much of the volume that briefly departed to chase the tech sector's now flat or non-existant bubble. One hundred of the key corporations representing all major sectors comprise its makeup.

It is a symbol that behaves in a very orderly fashion compared to many other markets, and also offers key insight to broad market direction with less random noise.

Figure 1: Weekly chart: OEX
Graphic provided by: Quote.com.
Graphic provided by: QCharts.
 
Notice how the OEX has remained within a sembalance of a regression channel for nearly two years now. A recent break above resistance the first week of this year quickly reversed the week after. From here we can begin to identify key action points in the market.

Support lies near the 570 area and resistance lowers at the 50-DMA (light green) and descending channel upper line (solid green). The mid-channel line (black) would be our next key area of support should the present selloff continue for some time.


Figure 2: Daily chart: OEX

Dialing down the time frame of this same weekly chart to daily mode shows us right where those channel lines have acted as price magnets. If the 575 area fails to hold (blue line) we must look towards 550 area as next firm support. It was a key measure through much of 2001 and will act like gravity on price action flailing below 575. Stochastic values in mid-decline suggest further weakness past Friday's close as well.

Many traders focus exclusively on the OEX for options and/or OEX iShares trading, but even for those who don't it may offer the best overall proxy in my opinion for any broad market assessment. Considering the OEX also serves as the underlying basis for the volatility index (VIX) measurement, it certainly merits every trader following price action as a gauge to assess what may happen next!



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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Date: 01/18/02Rank: 4Comment: 
Date: 01/22/02Rank: 5Comment: 
Date: 01/22/02Rank: 5Comment: 
Date: 01/22/02Rank: 4Comment: 
Date: 01/24/02Rank: 5Comment: Execllent article. However, OEX is sometimes a very difficult symbol to get a quote for, or an options chain..
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