Two weeks ago we put on a Paper Trade for a Sept 750/760/740/730 Tight Iron Condor,and the position ROI is currently up about 9.5% and our Delta was -3.73 at today's close and Theta at 29.34.
This position is working out great as the neutral Delta is weathering price fluctuations and the positive Theta continues to increase our profits as time decay melts away the option premiums.
No adjustments at this time.
Thursday, August 21, 2008
RUT: Retreat
We were nice enough to award a green uptrend line to the RUT, but just as soon as we put it up the RUT has already breached it. It also closed today below the 20MA on the daily.
Technically this chart is dying to retest the 720 area, and unless a miracle bull angel appears Friday morning, tomorrow is likely the day. I generally don't like to predict direction at all, but the 720 area is also intersecting with the 200MA which can act as a very strong magnet.
Keep your eyes on that 720 area too, as it "should" have some strong support there, but just as we have seen with resistance not holding the RUT back on it's climb the last month, the support can just as easily be ignored.
In summary, be prepared for anything as the RUT is a very loose cannon these days.
RUT Daily Chart:
Note that on the weekly chart it has started for form a bearish engulfing pattern at resistance.
RUT Weekly Chart:
Technically this chart is dying to retest the 720 area, and unless a miracle bull angel appears Friday morning, tomorrow is likely the day. I generally don't like to predict direction at all, but the 720 area is also intersecting with the 200MA which can act as a very strong magnet.
Keep your eyes on that 720 area too, as it "should" have some strong support there, but just as we have seen with resistance not holding the RUT back on it's climb the last month, the support can just as easily be ignored.
In summary, be prepared for anything as the RUT is a very loose cannon these days.
RUT Daily Chart:
Note that on the weekly chart it has started for form a bearish engulfing pattern at resistance.
RUT Weekly Chart:
SPX: Broke the Channel
The SPX broke the upward channel which is currently pointing to more of a consolidation then a break-out.
With the close at 1277 today it's stick between the 8MA and 20MA on the daily and still well below the "declining" 200MA (downtrend).
The SPX has put in two consecutive "up" days as it kisses the backside of the upward trendline. Keep an eye on the price in it's relationship to the 20MA. For any sustainable bullishness it will need to be above the 20MA.
SPX Daily Chart:
With the close at 1277 today it's stick between the 8MA and 20MA on the daily and still well below the "declining" 200MA (downtrend).
The SPX has put in two consecutive "up" days as it kisses the backside of the upward trendline. Keep an eye on the price in it's relationship to the 20MA. For any sustainable bullishness it will need to be above the 20MA.
SPX Daily Chart:
Monday, August 18, 2008
SPX: YIkes
More bad news for the banks seemed to be the catalyst for another sell-off of the SPX.
Still in the upward channel, but getting precarious. I wouldn't be surprised to see the upward trendline challanged intraday tomorrow. The real test will be to see where it closes.
SPX Daily Chart:
Still in the upward channel, but getting precarious. I wouldn't be surprised to see the upward trendline challanged intraday tomorrow. The real test will be to see where it closes.
SPX Daily Chart:
Sunday, August 17, 2008
SPX: Keep it Simple
Moving into next weeks trading we see that on the daily the SPX has put in a higher high and is trying to hang onto a higher low.
Based on that price action and it closing above the 50MA, the bias is still up.
There is some overhead resistance at the 100MA at 1335 but as we keep pointing out, as long as it remains in the upward trend channel we have to stick with the uptrend.
SPX Daily Chart:
Based on that price action and it closing above the 50MA, the bias is still up.
There is some overhead resistance at the 100MA at 1335 but as we keep pointing out, as long as it remains in the upward trend channel we have to stick with the uptrend.
SPX Daily Chart:
Wednesday, August 13, 2008
RUT: Earns Green Uptrend Line
Okay, from a pure technical standpoint I am very bearish on the RUT at this 750 level for 2 main reasons. Number one, 750 has been and is currently acting as strong resistance. Number two, (and this could be used as a bullish argument as well), it has gone up now for 6 straight weekly bars without a significant pull back and is becoming extremely overbought.
However, as a trader my opinion doesn't matter and it is not my "opinion" that pays the bills, it's the trades I put on based on the set ups I see in the price action.
At this point the current trend is up and a breakout above 750 could easily go to 800 over time even though it doesn't seem logical or possible in this questionable economy. Even though I still think it goes down from here, I have to be open to possibility that it can go up and trade the actual price action -- Not what I think will happen, but what is happening.
I've awarded the the RUT a green upward trendline on the daily chart which I will keep up there as long as it continues to close above it. When it closes below the green line I'll circle to break-point and we'll see how far it slides from there. I am giving the RUT the benefit of the doubt here in an exercise at keeping my mind open to any market movement no matter how much it doesn't make sense.
RUT Daily Chart: (With "NEW" Green Uptrend Line)
However, as a trader my opinion doesn't matter and it is not my "opinion" that pays the bills, it's the trades I put on based on the set ups I see in the price action.
At this point the current trend is up and a breakout above 750 could easily go to 800 over time even though it doesn't seem logical or possible in this questionable economy. Even though I still think it goes down from here, I have to be open to possibility that it can go up and trade the actual price action -- Not what I think will happen, but what is happening.
I've awarded the the RUT a green upward trendline on the daily chart which I will keep up there as long as it continues to close above it. When it closes below the green line I'll circle to break-point and we'll see how far it slides from there. I am giving the RUT the benefit of the doubt here in an exercise at keeping my mind open to any market movement no matter how much it doesn't make sense.
RUT Daily Chart: (With "NEW" Green Uptrend Line)
SPX: Down, But Hanging in the Channel
Not much to report on the SPX other then it continues to trade in the upward channel. As we noted before, as long as it stays in this channel the bias continues to be a slow grind up.
SPX Daily Chart:
SPX Daily Chart:
Tuesday, August 12, 2008
RUT: A Tale of Two Worlds
The RUT weekly chart shows us a tale of two worlds, a RUT that held prices above 750 (most of 2007) and a RUT that can't get a weekly bar to close above 750 (all of 2008 so far). So this week presents the ultimate challange, can it close a weekly bar above 750 thus opening the door for a move higher the following week?
Odds wise the deck is stacked against this from happening, but this is an odd market and anything can happen whether it makes sense or not. The chart below is a 2 year weekly chart and you will see that the RUT has never had a sustained rally with more then 5 white bars in a row.
The largest multi-week point gain prior to this current rally was 80 points with 2 huge weekly candles in Jan 08, this after a 150 point move down. Six weeks later it was testing those lows again and actually put in a lower low.
The RUT always seems to over-do it on the moves down and the moves up. Technically there is resistance at this 750 level, and technically it would also be plausible that any sustainable rally is going to need to retest past pricing areas. That would mean a pull back to at least the 720 area if not the 700 level itself.
A pull back is likely, but the timing and the point of "real" resistance will only be told over time. Should this week conclude with a topping tail on the weekly with the RUT closing the week below 735, then the chart could be setting up for a double top type of pattern at the 750 resistance.
If I were trading the RUT to the upside, I'd actually like to see a pull back to the 200MA on the weekly (about 720) to see if it could hold and bounce. This would be a more favorable entry for a long. Going long right now after 5 weekly bars heading straight up into resistance is not putting the probabilities in your favor.
RUT Weekly Chart:
Odds wise the deck is stacked against this from happening, but this is an odd market and anything can happen whether it makes sense or not. The chart below is a 2 year weekly chart and you will see that the RUT has never had a sustained rally with more then 5 white bars in a row.
The largest multi-week point gain prior to this current rally was 80 points with 2 huge weekly candles in Jan 08, this after a 150 point move down. Six weeks later it was testing those lows again and actually put in a lower low.
The RUT always seems to over-do it on the moves down and the moves up. Technically there is resistance at this 750 level, and technically it would also be plausible that any sustainable rally is going to need to retest past pricing areas. That would mean a pull back to at least the 720 area if not the 700 level itself.
A pull back is likely, but the timing and the point of "real" resistance will only be told over time. Should this week conclude with a topping tail on the weekly with the RUT closing the week below 735, then the chart could be setting up for a double top type of pattern at the 750 resistance.
If I were trading the RUT to the upside, I'd actually like to see a pull back to the 200MA on the weekly (about 720) to see if it could hold and bounce. This would be a more favorable entry for a long. Going long right now after 5 weekly bars heading straight up into resistance is not putting the probabilities in your favor.
RUT Weekly Chart:
Banking Index Blues
With the weakness showing up again today in the SPX I thought it would be a good idea to post the S&P Banking Sector Index to what it's chart might be telling us.
So far it's created a "V" bottom which, if it holds, would be somewhat uncommon. More common is a double bottom or reverse head and shoulders pattern which gives the price a chance to retest prior lows. After the huge beating the Bank Sector has had, it could certainly continue to rally and hold, but watch that upward trendline carefully as a break could signal the start of another leg down. News wise there still seems to be some possibilities of knocking it down again.
The Banking and Broker/Dealer Sectors are important components of the S&P 500 and "their" direction often steers the direction of the S&P 500.
The next upward target might be the 100MA at 210 which is also close to the 61.8% retracement of the plunge that started at the beginning of May.
On the daily chart the Banking Sector has put in a higher high, we now just have to see if the trendline holds to give it a higher low or if this may be the start of consolidation or another leg down.
S&P Banking Sector Index Daily Chart ($BIX)
So far it's created a "V" bottom which, if it holds, would be somewhat uncommon. More common is a double bottom or reverse head and shoulders pattern which gives the price a chance to retest prior lows. After the huge beating the Bank Sector has had, it could certainly continue to rally and hold, but watch that upward trendline carefully as a break could signal the start of another leg down. News wise there still seems to be some possibilities of knocking it down again.
The Banking and Broker/Dealer Sectors are important components of the S&P 500 and "their" direction often steers the direction of the S&P 500.
The next upward target might be the 100MA at 210 which is also close to the 61.8% retracement of the plunge that started at the beginning of May.
On the daily chart the Banking Sector has put in a higher high, we now just have to see if the trendline holds to give it a higher low or if this may be the start of consolidation or another leg down.
S&P Banking Sector Index Daily Chart ($BIX)
Monday, August 11, 2008
RUT: Bulltards Gone Wild
The RUT is moving up strong and so far looks like it wants to do a 100% retrace of the June move down. Next stop 764? It's ignoring resistance at this point, but we'll see it kick in a some point -- just don't know when so watch the charts carefully because the pull backs may be even quicker then he moves up.
RUT Daily Chart:
RUT Daily Chart:
Friday, August 8, 2008
SPX: Bullish Game On
Okay, the stage has been set and with the close over 1292 today it's on the launching pad to 1310+. There is little resistance to 1310 so it should be easy IF the bullish tone continues next week.
We've been talking about this green zone for a few weeks now and it finally has it's chance to test it out.
SPX Daily Chart:
We've been talking about this green zone for a few weeks now and it finally has it's chance to test it out.
SPX Daily Chart:
RUT: Can it Stay Above the 200MA?
I love trading the RUT. If for no other reason I appreciate the funky personality of this market index. To me it's very much like an excited puppy that just loves to frolic and play no matter what kind of environment it's in. The only danger is when it bolts into the street without looking and then has to start dodging cars. We love the puppy and we want it to be safe, but we need to teach him how to stay out of the street while cars are whizzing by.
Thanks for indulging me in my puppy analogy and let me give you a real world example of what I'm talking about. When I say "excited puppy" I'm referring to the bullishness of the RUT. In late May the RUT was continuing to move up and broke through the 735 resistance level. It was now in the street, it saw a car coming but it was in the other lane so no harm no foul. It kept playing in the street (above the 735 level) and the cars seemed to disappear so it started running down the street but this time in the other lane against traffic (RUT decided to go up to 750) The puppy was euphoric and now didn't even realize it was in the street any more but thought it was in a grass filled park, so it started rolling around on the ground fantasizing that's it's belly was being rubbed by Angelina Jolie (RUT is now up at 764).
The point here is that the puppy had no business being in the street with oncoming traffic coming and the RUT had no business being at 764.
The market is the great equalizer and often when prices go against common sense, experienced traders realize two things. One, don't argue with price action, just trade what you see; and two, if gas is at $4.50 a gallon and rising it's only a matter of time before small caps are going to get the smack down.
Well, the charts show how our story ended, and that was with the puppy going to the vet with a bumper injury (don't worry he's okay now) and the RUT crashing 118 points in 5 weeks before it bottomed and started bouncing back up.
The moral of our story is simple. Trade what you see, but be very cognizant of support and resistant levels and understand that they work almost all of the time although "timing" my not be on your schedule, but is completely up to the "market's" schedule.
We should all have trading systems and rules that take advantage of these wonderful extended moves that the RUT offers while giving ourselves plenty of time to be right and graceful ways to exit if we're wrong.
The RUT closed up almost 3% today to close at 734.30 and is sitting right at the 735 resistance level. The market closed with an extremely bullish fed week and next week we move into August expiry.
If the bullish tone continues than all of the indices can continue to move up and start building a base to start launching from; however, keep in mind that some resistance levels are being tested right now.
One other thing to note, the RUT has only spend 4 days this year above the 200MA on the daily charts including today. That means that the 200MA has also been a significant resistance level. If it can hold above this 200MA then it would be an extremely good sign for bulls, and likely propel the RUT to some new YTD highs. If it falls back under the 200 then the bears will have another crack at it.
Have a great weekend.
RUT Daily Chart:
Thanks for indulging me in my puppy analogy and let me give you a real world example of what I'm talking about. When I say "excited puppy" I'm referring to the bullishness of the RUT. In late May the RUT was continuing to move up and broke through the 735 resistance level. It was now in the street, it saw a car coming but it was in the other lane so no harm no foul. It kept playing in the street (above the 735 level) and the cars seemed to disappear so it started running down the street but this time in the other lane against traffic (RUT decided to go up to 750) The puppy was euphoric and now didn't even realize it was in the street any more but thought it was in a grass filled park, so it started rolling around on the ground fantasizing that's it's belly was being rubbed by Angelina Jolie (RUT is now up at 764).
The point here is that the puppy had no business being in the street with oncoming traffic coming and the RUT had no business being at 764.
The market is the great equalizer and often when prices go against common sense, experienced traders realize two things. One, don't argue with price action, just trade what you see; and two, if gas is at $4.50 a gallon and rising it's only a matter of time before small caps are going to get the smack down.
Well, the charts show how our story ended, and that was with the puppy going to the vet with a bumper injury (don't worry he's okay now) and the RUT crashing 118 points in 5 weeks before it bottomed and started bouncing back up.
The moral of our story is simple. Trade what you see, but be very cognizant of support and resistant levels and understand that they work almost all of the time although "timing" my not be on your schedule, but is completely up to the "market's" schedule.
We should all have trading systems and rules that take advantage of these wonderful extended moves that the RUT offers while giving ourselves plenty of time to be right and graceful ways to exit if we're wrong.
The RUT closed up almost 3% today to close at 734.30 and is sitting right at the 735 resistance level. The market closed with an extremely bullish fed week and next week we move into August expiry.
If the bullish tone continues than all of the indices can continue to move up and start building a base to start launching from; however, keep in mind that some resistance levels are being tested right now.
One other thing to note, the RUT has only spend 4 days this year above the 200MA on the daily charts including today. That means that the 200MA has also been a significant resistance level. If it can hold above this 200MA then it would be an extremely good sign for bulls, and likely propel the RUT to some new YTD highs. If it falls back under the 200 then the bears will have another crack at it.
Have a great weekend.
RUT Daily Chart:
Thursday, August 7, 2008
RUT: SEPT Paper Trade "The Tight IC"
For our September PAPER TRADE example we're going to sell (1) contract SEPT 750/760/740/730 Iron Condor for $8.50. Our total risk on this trade is $1.50
Our profit target is an ROI of 50% to 100% and we will exit our trade no later then the Monday before expiry which falls on September 15th.
Our breakeven levels on 9/15 are 717 and 770. There is a 53 point range between those areas where we can buy back the IC for a profit.
Our bias is that the RUT will continue to chop in this range for the next 4-5 weeks.
We do not plan on exiting this position early unless there is a substantial change in the market conditions. The broad markets seemed to have put in a short term bottom so we will trade what we see.
RUT: PAPER TRADE September 750/760/740/730 Iron Condor - sell for $8.50 (Graph shows theoretical P/L on Sept 15th)
Our profit target is an ROI of 50% to 100% and we will exit our trade no later then the Monday before expiry which falls on September 15th.
Our breakeven levels on 9/15 are 717 and 770. There is a 53 point range between those areas where we can buy back the IC for a profit.
Our bias is that the RUT will continue to chop in this range for the next 4-5 weeks.
We do not plan on exiting this position early unless there is a substantial change in the market conditions. The broad markets seemed to have put in a short term bottom so we will trade what we see.
RUT: PAPER TRADE September 750/760/740/730 Iron Condor - sell for $8.50 (Graph shows theoretical P/L on Sept 15th)
SPX: Typical...
The markets go up the markets go down, they hit resistance and they fall, they fall to support and they bounce. Yesterday they it hit resistance and today it fell.
Easy stuff right? How do we trade this stuff then?
On tonights call we're going to talk about a PAPER TRADE on the RUT to take advantage of some of this see-saw action we're seeing.
As for the SPX, my bias is for it to remain in the green channel and as long as it does the trend is a slow grind up to 100MA.
SPX Daily Chart:
Easy stuff right? How do we trade this stuff then?
On tonights call we're going to talk about a PAPER TRADE on the RUT to take advantage of some of this see-saw action we're seeing.
As for the SPX, my bias is for it to remain in the green channel and as long as it does the trend is a slow grind up to 100MA.
SPX Daily Chart:
Wednesday, August 6, 2008
SPX: At The Gates
The SPX put in a good positive day and banged once at the 1292 gates but was not granted entry. This is the 38.2% retracement level and the highest close since June.
We'll watch carefully for a rally above the 1292 but also be cognizant that this area could still act as resistance.
SPX Daily Chart:
We'll watch carefully for a rally above the 1292 but also be cognizant that this area could still act as resistance.
SPX Daily Chart:
Tuesday, August 5, 2008
SPX: Fed Sparks Bounce
Yesterday the SPX finished the day at the edge of green upward channel we put on a few weeks ago. This trend angle is the same as the angle it had in the March to May rally so we're just playing with the probabilities again.
It was bearish to close under the 30MA yesterday, but the SPX redeemed itself by closing almost 20 points above it today. The true test will come later this week when it will need to cross up and hold above 1290 to really prove that an upward move is on it's way.
As long as we stay in this channel my bias is a slow grind up to the 100MA (about 1330 to 1340).
SPX Daily Chart:
It was bearish to close under the 30MA yesterday, but the SPX redeemed itself by closing almost 20 points above it today. The true test will come later this week when it will need to cross up and hold above 1290 to really prove that an upward move is on it's way.
As long as we stay in this channel my bias is a slow grind up to the 100MA (about 1330 to 1340).
SPX Daily Chart:
Monday, August 4, 2008
Biotech Weekly Chart
The Biotech Sector strength is the only thing that's been holding the NDX up from a total collapse. Keep your eyes on this weekly chart as it is hitting resistance and could easily pull back from these highs and take the NDX with it.
On the brighter side, the Semiconductor Sector actually posted a gain today while everything else was cracking lower.
Biotech Sector Weekly Chart:
On the brighter side, the Semiconductor Sector actually posted a gain today while everything else was cracking lower.
Biotech Sector Weekly Chart:
Friday, August 1, 2008
SemiConductor Sector Index
The Semi's put in a new 5 year intraday low which coupled with the lacking Software and Internet Sectors is still dragging on the NDX.
There is a possibility of a double bottom forming here for the Semis, but if it can't hold there is very little support below this area and it could get real ugly for the Semis and the NDX.
SemiConductor Sector Weekly Chart:
There is a possibility of a double bottom forming here for the Semis, but if it can't hold there is very little support below this area and it could get real ugly for the Semis and the NDX.
SemiConductor Sector Weekly Chart:
Software Sector Weekly Index
The Software Sector weekly index is still looking ugly, but unlike it's Internet Sector cousin, the Software Index held the 200MA this week.
If this index can get a 200MA bounce it would help the NDX to hold up. We'll have to see what next weeks candle looks like. This week was just a lot of sideways consolidation.
Software Sector Index:
If this index can get a 200MA bounce it would help the NDX to hold up. We'll have to see what next weeks candle looks like. This week was just a lot of sideways consolidation.
Software Sector Index:
Internet Index Makes History
The Internet Index closed below the 200MA on the weekly chart for the first time in it's 9 year history (DOW Jones US Internet Index) and is forming a head and shoulders pattern. To be fair to the bulls it's also forming a falling wedge pattern.
It will likely take a year or so on the weekly charts to see which one pans out, but so far the bears are winning this one with the break of that 200MA. A double bottom is possible here so keep your eyes open.
Internet Sector Index:
It will likely take a year or so on the weekly charts to see which one pans out, but so far the bears are winning this one with the break of that 200MA. A double bottom is possible here so keep your eyes open.
Internet Sector Index:
NDX: Choppy Sideways Mess
Had to pull out to a weekly chart again on the NDX and as you can see it's still as the title suggests, "A choppy sideways mess."
The charts are gives us no hints as to where this thing is going and as you can see this weeks trading created another spinning top in the same area as the last 2 weeks priot.
Semiconductors, Software and the Internet sectors are all still bleeding, and although the Biotech sector has been on fire it's not enough to lift the NDX.
Of note, as mentioned in a separate post, the Internet Sector closed below the 200MA on the weekly chart for the FIRST TIME IN HISTORY. Granted the index is only about 9 years old, but it's significant to understand the ramifications.
NDX Weekly Chart:
The charts are gives us no hints as to where this thing is going and as you can see this weeks trading created another spinning top in the same area as the last 2 weeks priot.
Semiconductors, Software and the Internet sectors are all still bleeding, and although the Biotech sector has been on fire it's not enough to lift the NDX.
Of note, as mentioned in a separate post, the Internet Sector closed below the 200MA on the weekly chart for the FIRST TIME IN HISTORY. Granted the index is only about 9 years old, but it's significant to understand the ramifications.
NDX Weekly Chart:
SPX: Holding on by a Thread - 1260
1260.
That's the number everyone is watching and that's the level that the SPX was barely able to close above today, 1260.31 and just a few pennies away from sending the technical guys screaming a that 1260 was breached.
The daily chart itself looks pretty ugly, but we're still in the safe haven of the uptrend channel we drew a few weeks ago. The fact that the SPX was only able to spend one day above the 30MA is also a big disappointment for the bulls.
The bulls will have another chance next week to go retest the 1290 area and there should be some good support in this 1260 area. Good news next week would certainly help the technical effort.
SPX Daily Chart:
That's the number everyone is watching and that's the level that the SPX was barely able to close above today, 1260.31 and just a few pennies away from sending the technical guys screaming a that 1260 was breached.
The daily chart itself looks pretty ugly, but we're still in the safe haven of the uptrend channel we drew a few weeks ago. The fact that the SPX was only able to spend one day above the 30MA is also a big disappointment for the bulls.
The bulls will have another chance next week to go retest the 1290 area and there should be some good support in this 1260 area. Good news next week would certainly help the technical effort.
SPX Daily Chart:
RUT: I'm Impressed
The intraday comeback and it's ability to hold up under pressure really impressed me today. The last 2 hours of the day consolidated around the 716 area and every red candle was met with more buying to keep the index up above the 715 pivot area. The day closed creating a spinning top with a LONG tail and the RUT is comfortably above the 30MA and 100MA on the daily chart.
Not sure where all this bullishness is coming from, but as the RUT consolidates sideways it favors the bulls for another move up. Some good news on Monday could see some retests of the 726 intraday highs from a couple weeks ago.
RUT was the only index to close in positive territory today.
RUT Daily Chart:
Not sure where all this bullishness is coming from, but as the RUT consolidates sideways it favors the bulls for another move up. Some good news on Monday could see some retests of the 726 intraday highs from a couple weeks ago.
RUT was the only index to close in positive territory today.
RUT Daily Chart:
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