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Saturday, September 8, 2012

Weekend Portfolio Analysis (09-08-2012)

And Up we went! After two weeks of sideways action, Thursday delivered a solid elephant up bar and the S&P500 grew 2.4% this week. Then on Friday, the market was also able to shake off a poor Employment Report and remain in green territory.

This week I simply followed the plan laid out on the previous Weekend Portfolio Analysis and as soon as I saw a chance to close the RUT 780/775 and the SPY 145/147 for a combined profit I didn't hesitate. Both positions were closed on Tuesday. The RUT 780/775 Bull Put spread was closed for a small loss of 0.10, that is $60 in 6 contracts per leg. The SPY 145/147 was closed with a profit of 0.15, $240 in 16 contracts per leg. I got out of two positions and only kept the RUT 860/865 Bear Call Spread, which was looking comfortable back then.

Well right now, that RUT 860/865 is priced at 1.10. I initially shorted it at 0.65, that is a temporary loss of 0.45 per vertical ($45), equivalent to $270 for 6 legs that I have in play.

(Click on image to enlarge)

 The probability of success has been reduced to 73.40%.

Plan for the week

RUT is currently priced at 842.27. I have an alert set at 858 to adjust this position, and that's basically my plan with this position for the week. I will sit idle, and won't do anything unless RUT reaches 858. If it pullbacks, I will also stay put and keep taking advantage of time decay.
This week I also want to enter the first trade of the October expiration cycle. I tried an SPY 149/151 Bear Call Spread limit order on Friday for 0.30 credit, which I twitted about. But the spread never achieved that price. That same vertical spread is currently priced at 0.25. I think I might end up happy with 0.27 or 0.28.

Market conditions right now

The SPX index is still inside the uptrend channel that started 3 months ago. It is now closer to the high end of the channel but still with a little room in order to touch it. The index is firmly above the major moving averages 50 EMA, 100 EMA and 200 EMA. Stochastics are close to overbought but are not there yet. And the McClellan oscillator at 122.61 is showing that there is still room for a final upside push.

(Click on image to enlarge)

With 77.54% of stocks above their 20 SMA and 73.68% above their 50 SMA it is time for some digestion and probably some sort of pull back on this uptrend channel. There is also an incipient bearish divergence on the Stochastics oscillator, which, unlike price, hasn't reached a higher high.

All this leads me to believe that there is still a little room for more upside, probably half a point to one more point on SPY. But that chances for a pullback are high. Or at least some sideways action in the very short term. I would love this to be true, so I could enter an SPY 149/151 spread for something close to a 0.30 credit right before the pullback or sideways action starts.

If the pull back starts right away, well, I will have missed the opportunity to sell the Call spread, but that's what my system dictates. Stochastics and McClellan are just not oversold yet, so I won't regret not having gotten the order filled on Friday.

Possible high impact news this week:

Sunday - China will release  its Consumer Price Index report, Retail Sales and Industrial Production at 1:30am Eastern Time.
Thursday - US PPI at 8:30am. Then Federal Reserve Chairman Bernanke will deliver a conference at 2:15pm
Friday - Retail Sales and CPI at 8:30am.

Good luck this week!

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1 comment:

  1. As for the possible RUT adjustment this week.If 858 is hit this week, I will adjust this trade. I will close it for a small loss and use October options to play farther out of the money. Probably the 900/905 spread. I want a Credit of at least 0.60, and the farther I can position the spread the better.