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Sunday, October 7, 2012

Weekend Portfolio Analysis (10-07-2012)

The SP500 started the week at 1440.90 and closed at 1460.93 on Friday. A gain of 1.39% for the week. Supposedly 114000 new jobs were created and the unemployment rate went down to 7.8%, first time below 8% in almost four years. Of course this figure is to be taken lightly as revisions might ensue as it has happened in the past. But anyways, the market kept slowly inching higher.

There was no new trade on the portfolio. I was eying a possible SPY 153/155 for a 0.30 credit on Friday but my price was never achieved. I prefer to sell calls on SPX or SPY at this moment, as those instrument are clearly getting overbought faster than their counter parts IWM and RUT.

The only position remaining in the October expiration cycle, the RUT 910/915 Bear call spread is looking good.

(Click on image to enlarge)

The position already achieved max profit of $420. I could exit now, or be a greedy cuban boy and try to save closing commissions. Probability of success 98.78% at expiration in 12 days. My plan is to let it expire worthless.

Plan for the week

I don't have any positions on the November cycle yet, but I have no rush. The overbought/oversold parameters I always look for just haven't been present, and I believe it is better to not trade when you are not totally confident on the positions you are playing. I wouldn't be confident with markets that are not at extreme levels.

If the markets go up I will play an SPY call credit spread this week. I would like to sell the 153/155 vertical spread for at least 0.25 credit. That can be achieved if SPY hits 148.

If the markets go down, I won't trade anything unless they go down hard. Although not overbought right now, the market is closer to being overbought than it is to being oversold. If we go down this week, we probably won't reach the oversold levels that I love so much, unless like I say we fall hard to 140-141 which seems unlikely at this point with earnings season right in front of our noses.

Market conditions right now

The SPX's uptrend is still intact and "organized" inside the 3 month old uptrend channel.

(Click on image to enlarge)

Stochastics at 77 getting near overbought territory. McClellan at 12 showing plenty of upside room.
54.24% of stocks above their 20 SMA and 68.21% above their 50 SMA. Like I said, closer to overbought than to oversold, however with some good room to move up. I believe we won't see hard sell offs with earnings season in front of us, some recent decent data from the US and European credit concerns somehow pacified. I really want the markets to go up this week so I can enter the first November cycle position. The news front is also showing little activity for the week which is good for the market to slowly keep inching higher.

News this week:

Economic Data is going to be light this week with Beige Book on Wednesday, International
Trade on Thursday, and PPI/Consumer Sentiment on Friday. 
The Eurozone Financial Ministers are meeting and European Union Leaders Summit may also impact markets. China HSBC Services PMI will be released Sunday Night.

Good luck this week folks!

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