August 22, 2017

Archives for February 2007

Relief bounce leads to historically low VIX

I stated yesterday how the market had reached an oversold level where we typically see a bounce. A healthy relief bounce came today which brought the S&P (SPX) back to the pivotal 1444 area. The question is, will the 1444 area act as resistance or support going forward? I am leaning more towards overhead resistance at this point. I do think we could move a bit higher as we move closer to options expiration, but I think we could get another decent down day shortly after expiration. It truly depends on how the market reacts over the next few days. If the bulls manage to push the major indices into overbought territory I think a decent set-up could follow. Watch how the market reacts around the 1444 area. This should act as a wonderful … [Read more...]

Iron Condor Update

The major indices are once again approaching oversold territory. We still have a little room in the S&P (SPY), but not much. We are nearing an extreme oversold condition so watch SPY closely. A expect to see a short-term pop off the oversold conditions over the next couple of days. How strong the move is will most likely indicate how much the bulls have left in what has been a marvelous run. Remember, it is the week of options expiration so expect to see some volatility. Typically, returns are best on Monday, Tuesday and Thursday. Friday is statistically the worst performing day during options expiration. Well, it looks like our Iron Condor trade will expire worthless again this month (third month in a row). Short Iron Condors (a … [Read more...]

Short Iron Condor (SPX)

First, I would like to announce that our Short Iron Condor strategy looks like it will once again finish within our chosen range. Today we could buy back our credit spread for roughly $.25 per contract. The underlying SPX is now 32 points away from our short strike. It would take a move of over 2% for it to breach our short strike. Certainly possible, but unlikely. Remember, since SPX is a European option so it settles at the opening price on Friday. This gives us only four trading days until option expiration. This will be our third straight month with gains over 10%. and we will do our best to save you a spot once we make the portfolio live, which will occur after the March expiration cycle. Overbought/Oversold levels for February … [Read more...]

Support holds in S&P 500 (SPY)

The S&P sold off this morning until it hit what has been a strong level of support. Today was the fourth time in five days that sellers have attempted to move the major indice lower without much success. Buyers keep stepping in at roughly the 144.30 area (SPX 1444) which has been extremely frustrating for the bears. SPY is still trading in a fairly tight range for the last five days. Could this be the calm before the storm or just another pause on the way up? I can't remember the last time I have witnessed so many bearish indicators move into extreme territory at the same time. The bears have been piling up indicators for several months now without much notice from the bulls. This is why it pays to be careful at this juncture. Remember, … [Read more...]

SPY and IWM have officially moved into a “very overbought” state and the release of our New Model Portfolio

The major market indices moved higher again today. The move higher led SPY to break out of the tight range that it has been in for the last three days. However, the move higher was quickly met with strong overhead resistance at approximately the 1450 level of SPX. With SPY now in a "very overbought" and several of our other proprietary indicators reading extreme we will most likely take a position if the market nudges a bit higher. As usual our subscribers will be sent a real-time trade alert if we indeed decide on taking a position. Our condor spread trade is worth roughly $.50-$.60. We initially purchased the credit spread for $1.15 so we are roughly $.45-$.55 in the money right now if we were to take off the trade. The underlying SPX … [Read more...]

Range-bound trading continues

I will keep it short tonight. The market experienced another day of tight, range-bound trading. We haven't seen three days like this in quite some time. There is still some room to move on the upside, but according to the indicators I follow a move higher should be minimal. However, buyers have been able to keep SPY above 144.35 (SPX - 1444), obviously a key area of support. One thing is for certain the market is tightly wound at this juncture and typically when this type of situation occurs the market will make a sharp directional move outside of the range. As I write this futures are up and if it holds at the current levels we could have a nice gap tomorrow. A gap into an already overbought market typically spells trouble for the … [Read more...]

SPX closes with second straight day of tight intraday trading. What does this mean for the market going forward?

For the second straight day the market traded in a tight range (less than 6 points in the S&P (SPX). Over the past five years we have seen two instances where SPX performance traded in this tight of a range and each time signaled that a short-term top was near. Furthermore,  each occurrence was followed by a decline of roughly 4% three weeks later. After the nice rally on 1/31 the market has struggled to move higher. Overhead resistance seems to be quite strong. Could this be a necessary pause before another push higher or the beginning of an intermediate-term correction?  The bearish indicators are lined up and the current overbought (bordering near extreme) are, at least, signaling that a short-term top is near. Couple the current … [Read more...]

Upside looks minimal over the short-term

The market traded in a tight range today. Today's price action is often the early sign of a quick short-term decline. Historically, when the market moves to a new high while trading in a tight sideways manner the market is typically lower over the short-term (1-5 days). Combine this recent phenomenon with the overbought levels of the market and I think a nice set-up could be in the near future.    Just some food for thought. Overbought/Oversold levels for February 2, 2007 SPY - 77.7 (overbought) DIA - 69.5 (overbought) IWM - 79.3 (overbought) QQQQ - 60.8 (neutral) OIH -74.6 (overbought) GLD - 53.0 (very overbought) We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal … [Read more...]

Back in an Overbought State

Another push higher today moved the market (other than the NASDAQ 100 - QQQQ) into overbought territory. Typically, when we reach this type of extreme we know that the market struggles to move much higher over the short-term (1-5 days). I would feel more confident about a short-term decline if the market gapped higher or simply just moved into a very overbought state. Furthermore, I would like to see QQQQ join in the fun. If the NASDAQ 100 reaches an overbought state I might be tempted to fade the most overbought of the 4 major indices (SPY, DIA, IWM, QQQQ). Currently, it looks as though IWM is the underlying of choice, but we all know how quickly that can change. We received another mention in the WSJ journal this past week. It is our … [Read more...]