August 17, 2017

Range-bound trading continues to dominate

It was another widely vacillating day for the market, although the end result was the same as yesterday; flat. The struggle over who controls the 50-day moving average continues to dominate the market, but for how long? The market remains in a sideways trend and by the looks of it, could for several months.

As I have stated in the recent past, this should prove advantageous to those who employ premium selling strategies, particularly if the the VIX (investor’s fear gage) stays above 15. It currently stands at 16.23, well-above the 200-day moving average of 12.40. One thing to note, as the VIX rises, the more options traders prepare for choppy waters ahead. So be prepared for vacillation, although it should be contained within the range (with slight expansion as the summer progresses) the market has established since the onset of May.

While our ETF Extremes strategy has been dormant (we are patiently waiting for a signal) our SPX Short Iron Condor has benefited greatly from the rising volatility and the range-bound price action of the market. Now that the VIX is above 15, we are able to widen our chosen range which increases our likelihood of success from expiration cycle to expiration cycle. As it stands, the market is a smidge above the midpoint of our  160 range with only three weeks left until expiration. It has been like this since the May expiration cycle began. We stand to make over 13% in the strategy if the market falls within our 160 point range.

According to the “Stock Trader’s Almanac”, the first trading day in July the dow has been up 14 out of the last 17. Furthermore since 1950, the Dow has finished higher over 76% of the time. Enjoy the weekend!

Overbought/Oversold levels for June 29, 2007

  • SPY –  48.3 (neutral)
  • DIA – 49.1 (neutral)
  • IWM – 47.9 (neutral)
  • QQQQ – 59.8 (neutral)
  • GLD – 47.7 (neutral)
  • OIH – 45.4 – (neutral)  

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