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Sunday, October 28, 2012

Weekend Portfolio Analysis (2012-10-28)

The S&P500 started the week at 1433.21 and closed at 1403.28 for a loss of -2.09%. Pretty much in line with my analysis last weekend. I took advantage of the weakness on Tuesday and  opened a Bull put spread with RUT 750/745 using November options.

The position is working out nicely

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Temporary profit of $99 out of a possible $255. Probability of success 93.91%.

The other position is the SPY 137/135 Bull Put spread which is looking like below:

(Click on image to enlarge)

Probability of success 74.52% and unrealized loss of $45. Obviously a little affected with the move this week but nothing out of control.


Plan for the week

Ok, so at this point I have two Bull Put spreads in the portfolio for the November expiration cycle. That is double downside exposure and no Bear Call positions. I obviously don't like that so my plan is to close one of them as soon as I have a chance. The best candidate is the SPY 137/135 spread which is the least safe position. If the markets make a little push up and this position gets to a profitable balance including commissions I won't hesitate to close it. That SPY spread was entered for a credit of 0.26 and I'm willing to close it for a debit of 0.15 or better.

If the market doesn't move up but stays sideways I will simply sit idle getting time decay in my favor.

If we keep going down, I will adjust my SPY 137/135 if/when we hit 137.20. The RUT 750/745 spread won't be touched this week.


Market conditions right now

SPX's uptrend channel definitely broken. 50 day Simple moving average penetrated.

(Click on image to enlarge)

Stochastics oversold, but McClellan showing that there is a little more room for the downside. 32% of stocks above their 20 day simple moving average, which is close to oversold but still leaving downside room.

The CBOE Index Put/Call ratio is showing a reading this week of 1.32 and the Equity Put/Call ratio is at 0.77. Those are elevated numbers showing there is plenty of pessimism but curiously slightly lower than last week before the sell off.

There is a potentially new downtrend channel forming that if confirmed, points to a low of 1385 by November expiration. I'm still slightly bearish but I believe a little push back up is close, probably during the upcoming week.


Releases this week:

Monday - Personal income and Personal spending.
Tuesday - Consumer confidence
Wednesday - European unemployment. Chicago PMI
Thursday - ADP Employment survey, Initial claims, ISM Manufacturing.
Friday - Non-farm payrolls

Good luck folks!



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