August 20, 2017

The Reprieve is Here…But for How Long?

A Few Random Thoughts

Last week we were witness to some of the most short-term overbought conditions seen all year. Now, post fed-taper, what should we expect to see?

Well, for starters the week following options expiration, particularly triple witching, is historically bearish. Couple that with the unclosed gap in the S&P 500 (SPY) from 9/10 and I anticipate we will see $167.73 sooner than later. We worked off the overbought conditions in most of the major ETFs and actually closed the first gap from 9/16 today. Now we patiently wait for the other shoe to fall.

All of our positions established last week are in great condition. Moreover, we might have the opportunity to sell more credit spreads to turn our verticals to iron condors. If we can do that over the coming week I would be ecstatic as our expected premium/income for the month would be outstanding. As it stands, we are already bringing in above average premium for the expiration cycle…but if the market allows us to take more out in a reasonable manner…why not?

If you look at the High-Probability indicator below you can quickly see that most ETFs stand in a short-term neutral state. I have my eye on bonds right now. If you notice TLT and TBT and in overbought/oversold states, but I would like to see a push further into very extreme states before I make a trade.

Interesting Tidbits

Esteemed analyst Jason Goepfert of recently stated, “those who make a living sticking their neck out to clients have a very difficult time straying far from consensus.  So when we see one strategist shift their opinion, others tend to follow, and there ends up being few outliers. Currently, strategists at some of the largest Wall Street firms are predicting a pretty flat rest of the year for the S&P 500. ”

Now, as most of you know, I could really care less what Wall Street analysts think about where the market is headed. But, I will say that the pot odds currently lean with the bulls over the intermediate to long-term. And if we are indeed in for a relatively boring push into the end of the year our strategies, particularly our iron condors should excel.

As I side note I will be introducing a put selling strategy as part of my High-Probability subscription. Right now I trade all forms of credit spreads, a few directional trades and now I will be selling puts from time to time.

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If you are a believer in a statistical approach towards investing please do not hesitate to try my options strategies. I use simple mean-reversion coupled with probabilities for each and every trade. Give it a try, it’s free for 30 days.

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