July 28, 2017

Archives for September 2010

Failed Breakout on all the ETFs I follow

The S&P (SPY) gapped higher today to close the last of the overhead gaps on SPY. Guess what happened next? If you guessed a sharp decline then you are right? Is this the final trap for the bulls, at least over the short-term? The decline that followed (and still going lower as I write this post) has moved below what has been a strong area of overhead resistance at $114.73 and is now testing short-term support at the 1130 level on the /ES (S&P futures) or the $113.80 area on SPY. Here are a few good charts from my friends Tim Knight and Serge Farra. I am still holding my SPY puts with the expectation of a close of the 9/14 gap at $111.02 (high from 9/13). As always, please do not hesitate to email me from if you have … [Read more...]

Food for thought?

The price action on all of the major ETFs yesterday could be defined as a hanging man. Check this out and see what you think: What is a Hanging Man? Kindest, Andy … [Read more...]

Where is the patience?

Yes, I am still holding the SPY position in My Options Portfolio. It is called patience. A term that many options traders struggle with at times. I am currently short the SPY at three different strikes and I can tell you that I am in the red in all three positions. Conviction is key as a trader. Believe in your trade throughout the process until, of course, your mental/or hard stop has been met and then you exit the trade accordingly. In the case of my current position, I knew that the 5/14 overhead gap would be my point of max pain (stop-loss) and a sustained push through that level would drive me to exit my trade. However, that hasn't happened.  Instead, we have seen strong overhead resistance at the $115 level. Furthermore, we remain in … [Read more...]

Capital Preservation is Key

Money management, capital preservation, stop-losses, and position-sizing are (in my opinion) the keys to options trading success. Trying to be a hero when a position moves uncomfortably away from you can (and often) leads to disaster. All traders at some point have experienced this at some point. Almost every trading text out there decribes, in great detail, the authors great epiphany after a disastrous, account depleting journey in trading. These one or two failing experiences seem to create that “ahhhh” moment where, as a trader, you ”get it”.  The reason I mention this is that so many times in a market like we have experienced over the past week traders that are long, continue to be long, in the face of a sharply declining market. Why? … [Read more...]

April 13th Gap Closes in SPY

The month of September has certainly not lived up to its historical billing as "the most bearish month for the market". Since the gap up on 9/1 SPY has advanced 7.52%. However, the gains have been on the backs of very low volume. Couple this with what I have been stating over the past few trading days and you can see just how the probability of a short-term decline has increased dramatically. Seasonal weakness, extreme overbought readings and today's close of the 5/13 gap at $114.73 had pushed the high-beta QQQQ to an RSI (2) reading to over 99.5. At the close the RSI (2) had moved to 79.6, but the RSI (3) and (5) remain in an overbought state with an 84.2 and 83.3, respectively. The close of the 5/13 gap was almost picture perfect as … [Read more...]

Extreme Overbought Territory

I stated in the last trade alert today (subscribers only) that as a high probability, mean-reversion trader I thrive on situations where the std. deviation has pushed to extremes. Well, almost every ETF I follow has moved into a short-term extreme after today's rally. The tech-heavy QQQQ's have pushed to 99.9 on the RSi (2). As you can probably guess, a short-term reading this extreme does not occur often. Admittedly, my current position is nearing the max pain area, so I could potentially close out the position (most likely the prior two trades with lower deltas) for a loss if the indice keeps pushing violently high. When exiting a trade I typically look for a  fade of the current direction to a critical area of support/resistance and … [Read more...]

Patience, Patience, Patience

As we all know patience is a virtue and the market is certainly testing the bears patience right now. All of the short-term indicators are pointing towards a short-term reprieve, yet the bulls have been able to keep the market afloat amid extreme overbought levels. The last three days have seen the market basically move sideways. This can be frustrating as a swing trader particularly when the Mr. Probability is leaning so heavily towards a move lower. I am still holding my position(s) and will do so until a either see a sustained move to the upside or a move that takes the S&P (SPY) down to a level that closes the gap from Monday which is around the $111.60 area. I just wanted all of you to know that I have a few remaining spots … [Read more...]

Adding to My Position

As a high probability, mean-reversion trader I thrive on situations where the std. deviation in the indicators I follow closely push into an extreme state. I increased my contract size slightly due to the extreme readings in all of the indicators I follow. Bearish seasonal tendencies are also upon us. The next eight trading days are historically weak which increases the probability slightly for a short-term reprieve. Typically, when we see a short-term 'very overbought' reading in every major bemchmark coupled with historically weak seasonal conditions the market takes a break. The most recent gap should also weigh on the market over the short-term particularly given the extreme readings and should give me a nice area to take a bit, if … [Read more...]

Short-Term Bearish Move Increases

The last of the major indices, the Dow (DIA), closed its 8/11 gap today and now all of the major benchmarks plus the ETFs (20+) that I follow (mentioned weekly in my subscribers only report) have moved into a short-term overbought to very overbought state. Couple this with seasonal weakness ahead (the next eight trading days are historically very weak on a seasonal basis) and another unclosed gap and I think we could see another short-term reprieve right around the corner. I am currently looking at a few potential trades that have come across my radar which could come to fruition as early as tomorrow, so suscbribers be aware of a real-time trade alert coming your way. I might have more on the current state of the market later this … [Read more...]

8/11 Gap Fill in the S&P

The holiday shortened week and lack of volume (due to the Jewish New Year) has the market in a bit of a stand still this week. Yes, the market has continued the push higher, but overhead resistance coupled with short-term overbought levels in all of the major indices seems to have put a damper on the bulls latest attempts to push he market higher. Yesterday, was wonderful (in my opinion) and telling if you are a bear. The gap fill (8/11) in the S&P (SPY) seems to have happened at the perfect time. Couple all of the aforementioned with a move into one of the seasonally weakest times of the year for the market and a move down to close the 9/1 gap in the S&P seems plausible. Remember, I am a high-probability, mean-reversion trader … [Read more...]