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Sunday, May 13, 2012

Weekend Portfolio Analysis (05-13-2012)

SPX had a loss of -0.9% this week. And it looks like a potential downtrend channel might be forming....

(Click on image to enlarge)
Oscillators look a bit oversold and only 34% of stocks are above their 20SMA. Some pessimism and fear could be noticed this week in the markets abroad. But US traders seemed to step up every day and bid up the markets. Of course it is May! and of course people are expecting sell offs! But with so many people being pessimist, I believe the downtrend (if it continues to develop) will be an organized one and not a crash, because a crash is what they're all expecting, so when people are kind of ready for it,......I just believe chances are lower.

The 129/131 SPY Bull Put Spread has a temporary loss of ($182), I would have liked to close it this week but it didn't enter profitable territory. Even if the downtrend channel develops as I drew it, it represents an SPY value of 132 - 133 by June expiration. Which would make this position a winner, but, there's no reason to risk it. As soon as this trade is in profit, enough to cover commissions (in/out) I will be exiting.

The 70/72 IWM Bull Put Spread on the other hand, will stay. Hopefully until expiration. This one feels a lot safer to me, farther away from current market prices and showing a temporary profit of $91.

The coming week will have some news releases that might move the markets a bit: Retail Sales on Tuesday, Housing Starts, Industrial Production and FOMC Minutes Wednesday, and Jobless Claims, Philly Fed, and Leading Indicators Thursday.

If the markets keep going down, I will not open new Put credit spreads, as the risk of the portfolio in the downside needs to be contained. If the sell off threatens the SPY 131 value, I will be adjusting that position . If the sell off is not strong, I won't do anything. If the market starts to move up from oversold terirtory I will look forward to closing the SPY 129/131 spread for a small profit, and if we SPX gets to hit 1380-1390 I would like to sell some calls, using, again Credit call spreads. That's my plan for now!

Be well guys! And trade better!

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