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Sunday, August 5, 2012

Weekend Portfolio Analysis (08-05-2012)

It was mostly a bearish week until Friday came with that huge reversal candle. Overall The S&P500 gained around 0.5%. Now with the busiest week of the month in terms of news behind, and earnings season winding down this might very well be a boring month ahead of us. Summer markets tend to be a little boring at times lacking conviction and volume, so you have to be very careful with your trade set ups and your position sizes.

 With the reversal experienced on Friday the uptrend channel is still intact. Furthermore, with only 55% of stocks above their 20 Day Simple Moving Average and the McClellan Oscillator for SPY close to the zero line, this market is far from overbought. As usual, I'm not saying it will go up, just saying that market breath indicators still leave plenty of room for the upside. And thin markets, with lack of volume and news tend to creep higher little by little in an almost painful way.

Moving on to the portfolio. The August portfolio is looking pretty good right now. The RUT 700/690 Bull Put Spread is far enough from the current price of 788.48. And the RUT 860/870 Bear Call spread is also pretty comfortable. With 12 days to expiration RUT would need to move up or down more than 10% to affect these positions. Something possible but unlikely. So, the plan right now is to let them expire worthless and not touch them anymore. I will only adjust these positions in the event RUT hits 702 or 858 by August 17.

Here is the Iron Condor made up of those two RUT Credit Spreads.

(Click on image to enlarge)

Very comfortable position now, with a 98.59% probability of success.

This week, I opened the first September position. An SPY 145/147 Credit Call Spread. The position made money at first as the market went down Tuesday through Thursday only to lose it all on Friday. As of this writing that position is not losing nor gaining anything. I will keep it there as long as the uptrend remains "organized" in this slow uptrending channel.

(Click on image to enlarge)

I will not open new positions this week, unless the markets fall hard. In which case I will look into selling September SPY Puts probably in the 124, 125 area. Other than that. Not too much to do.

Good luck this week folks!

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