August 19, 2017

Archives for March 2007

April tendencies and the current state of the market

Today's price action was practically identical to yesterday's. The trading day starts out strong and fades until mid-day where it hits what has proved to be fairly strong support (1412 area on SPX) and then begins the climb back up into the close. As I stated yesterday, the price action seems to be the typical end of the quarter window dressing especially given the lack of volume during the end of the day ascent. Now the market enters the historically strong month of April. The Dow has seen 6 straight years of gains during the first day of April. Furthermore, the first trading day of April has finished higher 9 out of the last 12 years and the trading day prior to Good Friday  has been higher in the S&P 9 out of the last 11 years with an … [Read more...]

Intra-day Reversal Window Dressing? Overwhelming Short-Term Seasonal Bias Ahead

The market moved sharply lower shortly after the open only to reverse itself 90 minutes before the close of the trading day. Was the intra-day reversal just end of the month/quarter window dressing or an early start to the upcoming positive seasonal bias? My guess is the former, but it is just that, a guess. I would still like to see a dip down to the 1410 area of the S&P (like everyone else it seems) before seriously considering a position on the long side. Tomorrow is the last trading of March and the short-term seasonal picture is historically bleak. However, the bearish tendencies are quickly reversed as we move into the first week of April. Given the upcoming seasonal bias I think a portion of yesterday's post is worth repeating. I … [Read more...]

Short-Term Seasonal and Technical Picture

The month of March and the first quarter are finally winding down. As you can see below the major benchmarks are nearing an oversold state. The next two trading days are historically weak with the probability in the S&P of a advancing day at only 33% and 48%. Furthermore, according to the Stock Trader's Almanac (an invaluable tool) the last trading day of March has been lower 13 out of the last 17 years with significant losses. If the market does move lower we should expect to see "oversold" to "very oversold" conditions which should prove to be an area for considering short-term long exposure. Moreover, the first few trading days are historically very bullish. The first trading day of April has finished higher 9 out of the last 12 years … [Read more...]

Futures pointing to further declines

The anticipated short-term decline finally came today and the major indices we follow (with the exception of the S&P (SPY)) are firmly entrenched in neutral territory. As I write this futures are lower across the board. This will obviously help out our current condor position and should give us some breathing room for the moment. As I always do, I will look at our position to see if any adjustments make sense at this juncture. Most likely, I will sit tight with our current position, but I always want to see what the market is willing to offer. As for the ETF Extremes I am sitting comfortably on the sidelines until a high probability set-up comes my way. Even with my recent short-term bearish bias I was still somewhat uncomfortable about … [Read more...]

Short-term bearish bias

A sharp decline occurred immediately following the  the surprisingly poor housing news (new home sales fell 3.9%) from the Commerce Department at 10:000 EST. However, the steep decline was recovered by the end of the trading day. As a result, the market is still within the range that established towards the end of last week. Furthermore, the S&P remains in an overbought state. My sentiment over the short-term (1-5 days) continues to be bearish. I stated at the end of last week that "this type of price action (substantial advance followed by tight range-bound price action) typically leads to a short-term reprieve, particularly  when the market is in an overbought state. Furthermore, the longer the indices remain in a tight range the … [Read more...]

Short-term bias leans towards the bears

The S&P experienced the best one week performance since March 2003. After a nice rally Monday-Wednesday, the market was unable to continue the surge higher during the last two trading days of the week and as a result traded in a very tight range. As I have stated many times in the past, this type of price action (substantial advance followed by tight range-bound price action) typically leads to a short-term reprieve particularly  when the market is in an extreme overbought state. Furthermore, the longer the indices remain in a tight range the shaper the move outside of the range and given that the upside looks limited due to the overbought levels I expect to see a short-term move lower towards the beginning of next week. Not much has … [Read more...]

Short-Term Post-Fed Reversal

I am keeping it fairly short tonight as my mother is in town visiting. Please do not hesitate to email me with any topics that you would like for me to discuss. I have already had a request for tax laws on options trading so I will be covering that next week. I would love to hear other requests, comments or ideas that will make your trading/investing more worthwhile. Now onto today's comments. After the best three day performance since November 2004 the major benchmarks traded in a fairly tight range and finished the day basically flat. The benchmarks were unable to work off the overbought conditions so I still anticipate that the market will experience a short-term decline over the next few days. Any moves to the upside should be … [Read more...]

Overbought! Largest three day advance in months.

Immediately following the Fed announcement at 2:15 EST the market surged higher which pushed all of the major benchmarks into an "overbought" to "very overbought state". Typically, when the market moves sharply in one direction it is often reversed within a few days. Given the the current overbought levels and the fact that the shorter-term levels I follow are in an extreme state I would expect to see a decline over the next few days. The question is will the expected short-term decline wipe out today's gains? I tend to doubt it, at least over the short-term, but stranger things have happened. The extreme short-term overbought situation should make for an interesting short-term set-up especially if I see a small advance over the coming … [Read more...]

Be aware of a potential false breakout

The market continued to rally today and has pushed the major indices near an overbought state. Our shorter-term overbought/oversold measures are nearing an extreme so more than likely we will see a short-term decline or pause very soon. As I stated yesterday the 141 level of SPY (1410 on the SPX) should prove to be an important area of resistance. So far the market has held up quite nicely, but I think the move could be overextended. The fed announcement is due out tomorrow so be prepared for some volatility. Typically, any sharp directional move after the announcement is reversed within days so be careful for false breakouts particularly if we see a sharp move to the upside. The VIX dropped another $1.32 today so premium is once … [Read more...]

Iron Condor Position and the Rally

We established our SPX short Iron Condor trade with a 140 point range. We were able to get in at the open before too much premium was sucked out. There are many ways to use this strategy and over the course of the next year or so I will randomly (when the situation arrives) talk about various ways to effectively use this strategy. More importantly, I will talk about the pitfalls of the strategy and how to appropriately manage positions gone astray. It should be an educational. The rally today was unable to push the major indices into an overbought state. Recently, when the market rallied it would push the indices into an overbought state which typically signals a short-term decline or at minimum, a pause was near. Not this time. … [Read more...]