July 21, 2017

Archives for May 2007

The Dow Nearing Technical Extremes

The Dow (DIA) has once again moved into "very overbought" territory" and our shorter-term proprietary indicators are nearing also nearing an extreme.  I mentioned yesterday that if the bulls can sustain the positive momentum through tomorrow then we could see a short-term opportunity present itself as early as Friday. Thursday of option expiration week is typically positive and tomorrow is no different as the S&P, Dow and Nasdaq 100 are historically higher 61.9%, 71.4% and 71.4% of the time. Remember, historically if the market is overbought as the market moves into the week of post options expiration a decent short opportunity  is usually found. In this case, the large-cap Dow (DIA) looks to be the most favorable for a short play. As you … [Read more...]

Seasonal winds could be blowing at the back of an already favorable technical set-up

Over the last ten days the S&P (SPY) has established a trading range that seems to show strong resistance at $151.50 and decent support around the $150 area. My guess is that we will see similar price action as we move closer to options expiration on Friday. I would be surprised to see the S&P (SPY) break the defined range mentioned above this week, but next week could be a different story. Post-expiration is a completely different story though. The average return is 0.03% with only a 53% chance of ending the week higher. You might be asking yourself, how can this help me? Well, if the market is oversold coming into expiration week the probability of a trade to the long-side could be favorable, whereas if the market is overbought as the … [Read more...]

May expiration cycle looks good for the SPX Short Iron Condor. Are the higher-beta indices telling us something?

The week of option expiration is finally upon us and our SPX Short Iron Condor strategy (after a rough few months) finally looks to reap the max profit for the month. As I reported on 5/11, the seasonal edge for the strategy is here and hopefully we can take advantage of the typical range-bound period from May-October. Price action during the week of option expiration tends to be fairly lackluster and I would expect to see much of the same this week as the S&P struggles with the 1500 area. Since 5/2 the S&P has been trading in a fairly tight range and I do not expect to see that change, at least over the short-term. However, if the market can somehow manage to push higher I would expect to see weakness towards the early past of next week. … [Read more...]

Summer Doldrums and the Iron Condor

Over the last few weeks the S&P seems to have found a comfortable trading range. I expect to see much of the same as the market moves into the week of options expiration. We learned some valuable lessons last expiration period in our SPX Short Iron Condor strategy and will certainly not make the same mistake twice. Last month was indeed a anomaly, but this is where we learn the most. As it currently stands our Iron Condor strategy  is 45 points away from the short call strike which should be ample room in assisting the strategy towards a max gain of 6.5% this month. The underlying SPX had 135 point range to work with during the four week expiration cycle or a 4.5% move in either direction. We should receive the same opportunity to … [Read more...]

More Selling? Range-bound? Summer Doldrums?

First, I would to thank Seeking Alpha, Yahoo Finance, WSJ and several foreign publications for recognizing my blog over the past few months. The response has been overwhelming. I hope I can continue to provide useful and timely information for all of you. I would also like to congratulate those of you who have recently benefited from my recent posts. I certainly appreciate the kind words and hope that I can continue to contribute to your trading success.  We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader or new to our blog and find our thoughts useful please show us your support by joining our newsletter service. We count on your financial support to keep our service alive and … [Read more...]

Will we see a “Fed Reversal”?

As expected, immediately after the Fed announcement, market indecision set in and we witnessed the typical wild vacillations for roughly 15 minutes. Then, what a surprise, buyers stepped in and drove the market to another new all time high. Historically, when the market moves higher after a fed announcement we will see a "Fed reversal" pattern where the initial move is reversed in the days following. Couple the difficulty sustaining post-fed gains with the current "overbought" to "very overbought" state of the major benchmarks and the extremely low reading in the "average true range" of the higher-beta Nasdaq 100 (QQQQ) and you can see why the probability of a short-term move to the downside is high. As I stated in the blog yesterday, … [Read more...]

Another successful trade in the ETF Extremes strategy!

Trade initiated May 4, 2007  Trade closed May 8, 2007  A trade was signaled in our ETF Extremes strategy on Friday (5/4). The quick rise in the S&P brought the indicators we follow into an “extreme” state. As a result, a signal was triggered in the ETF Extremes strategy. We decided to buy 10 Jul07 SPY 151 puts (SYHSU) for $3.10.  Today, with the futures down early, we sold the Jul07 151 puts (SYHSU) for $3.30, resulting in a 6.5% gain on the trade. We did not want to risk losing our profits ahead of the fed minutes that are scheduled to come out at 2 PM EST tomorrow. Furthermore, in this current market where every dip is quickly bought we decided that it was best to lock in a small profit. I say small, but this one trade alone … [Read more...]

S&P at Technical Extremes

The short-term bearish seasonal conditions that typically occur in the S&P on the 4th and 5th trading day of May did not live up to the historical billing this year. This is why I have stated repeatedly that seasonality alone is (in almost every case) not a reason to place a trade.  When compared  with the current state of the market at the time the seasonal tendency arrives, the probability of a successful trade can be increased tremendously. The S&P has struggled to advance over the last few days and now more of the technical indicators that we follow have reached extremes. The intra-day range today was one of the tightest that we witnessed in quite some time and has led to extreme readings in the "average true range" of several of the … [Read more...]

S&P in a “Very Overbought” State leading into Monday’s Short-term Seasonal Bearishness

After moving sideways for most of the day the major indices moved higher during the last few minutes of trading. This brought the S&P (SPY) into a very overbought state leading into a seasonally bearish day. Monday, the fifth trading day of the month is quite bearish as only 19.0% of the days have finished higher. However, as I always state, seasonality alone is (in almost every case) not a reason to place a trade.  When compared  with the current state of the market at the time the seasonal tendency arrives, the probability of a successful trade can be increased tremendously. Our shorter-term proprietary indicators have also reached an extreme which often signals that a short-term decline is right around the corner. Overbought markets … [Read more...]

Short-term Bearish Seasonal Winds Blowing In.

Bullish seasonal tendencies (end/beginning of the month) ended today as the market officially moves into the "sell in May and go away" period. The next two trading days are historically quite bearish as the S&P has only finished higher 23.8% and 19.0%, respectively. seasonality alone is (in almost every case) not a reason to place a trade. However, when compared  with the current state of the market at the time the seasonal tendency arrives, the probability of a successful trade can be increased tremendously. Always be aware of the market’s seasonal picture. With three out of the four major benchmarks in an "oversold" to "very oversold" condition the probability of a sustained move higher is low. The market-moving unemployment report … [Read more...]