August 17, 2017

Strong Seasonal Winds Blowing In

With only four trading days left in October will we see the historically bullish seasonality that occurs during the last three days of October and the first three trading days of November. Going back over the entire history (12 years) of SPY (S&P) not once did the aforementioned timeframe finish lower.

Furthermore, the Stock Trader’s Almanac has the six days marked with a bull symbol. This signifies favorable seasonal conditions with the S&P finishing the days higher 66.4%, 81.0%, 61.9%, 71.4%, 66.7%, and 61.9%. It is the longest string of “bull symbol’ days in the must-have reference.

Given the recent price action and the bulls ability to keep the benchmark S&P above its 50-day moving-average I think the seasonal winds could be blowing at our backs again this time around. I would prefer to see another heavy sell-off tomorrow so that the major indices we follow reach an “oversold” to “very oversold” condition. If this price action occurs then we could see a signal in our beloved, yet admittedly frustrating (at least for those who want action) ETF Extremes strategy.

Our Iron Condor trade looks great as we end the first week of the November expiration cycle and the SPY Diagonal LEAPS strategy contniues to blaze forward with an exceptional 4.7% gain during its first five weeks of existence. We will continue to follow the basics of the strategy in the community blog and a more in-depth look in our Monthly and Expiration Reports (Subscriber’s Only).

Our delta sits at 164, gamma -18 and theta 21. Remember we always start out each expration cycle long one LEAP contract so we expect to see an overall delta position similar to the current reading of 164. 

Overbought/Oversold for October 25, 2007

S&P (SPY) – 43.3 (neutral)

Russell 2000 (IWM) – 39.9 (neutral)

Dow (DIA) – 42.6 (neutral)

Nasdaq 100 (QQQQ) – 45.5 (neutral)

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Andrew Crowder, Chief Investment Strategist,