SPX / Bullish Divergence

A wacky week so far, and Friday looks like it's going to be another roller coaster ride as well as we move into the weekend ahead of next Tuesday's Fed announcement.

Two things I wanted to point out on the charts (one for the bulls and one for the bears)

For the bulls, there is some bullish divergence on the MACD as indicated on the charts. This hints that the momentum of the move down is weakening.

For the bears, any bounce up will likely find resistance at the 50MA (the SPX has not been above the 50MA since Since December). Prior to getting past the 50MA it still has the 30MA to hurdle first. It's only spent 4 days in 2008 above the 30MA.

All in all this just shows more evidence of chop and consolidation in this range.

Keep an eye on the Fib levels too as you can see from the green circles that those levels have consistently resisted for the past few months.

The bias continues to be neutral until it cracks below 1275 or above 1390.

SPX Daily Chart:

DOW Weekly Cracked

The DOW started the week by cracking BELOW the 5yr uptrend line, the key will be to watch the next 4 days of action to see if it closes above or below the weekly trendline.

DOW 5 Year Chart:

IWM Unbalanced Condor Revisited

Back in January we looked at the possibility of creating an unbalanced iron condor in these bearish conditions to limit our downside risk.

This trade was shown for educational purposes only.

We showed an example of a March IWM 74/76/70/69 Iron Condor were we received a credit of $1.00. The idea was that since our top strikes were 2 dollars wide and our bottoms were only one dollar wide we had no downside risk.

The real magic of this trade is exemplified on a big down day like today where the bottom strikes get completely run though. With just over 10 days left before expiration, we can pull the trade off and still make a small profit.

To buy back the bottoms at todays close would have cost .78
To buy back the tops at todays close would have cost .03
Total cost to buy back is .82 ($82) + $12 in commissions.

Received $100 credit less $84 to buy back plus all commissions. $6 profit.

To pull off the entire trade you would still make 6% after commissions.

The Original Chart:

RUT 5 Year Weekly Chart

The RUT 5 Year Weekly Chart shows that Russell 2000 is getting close to a retest of the 650 January intraday lows. The RUT closed today at 26 Month Low. With the current momentum, don't be surprised if we see a retest of 600 in the next couple months.

RUT 5 Year / Weekly Chart:

NDX 2 Year Chart

The NDX closed at a 14 month low today and is poised to possibly fall to the next fib level of $1618 -- that may take some time, but that would be my next intermediate target.

NDX 2 Year Chart:

DOW 2 Year Chart

The Dow is still holding above the recent lows, but getting very close. Note also the 2 Year Uptrend Channel that is close to being tested.

DOW 2 Year Chart:

SPX 2 Year Chart

The 2 Year Chart on the SPX shows we have closed today at a 17 month low. Note also the resistance found at the fibonacci levels.

SPX 2 Year / Daily Chart: