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Sunday, December 16, 2012

Weekend Portfolio Analysis (12-16-2012)

SPX started the week at 1418.07 and closed at 1413.58 for a small loss of -0.32%. No position was entered this week as I wait for the market to reach an extreme level.

The RUT 870/875 Bear Call Credit spread is still looking fine:

(Click on image to enlarge)

Temporary profit of +$37.50 and probability of success at expiration 81.22%. The position got a little heat when RUT hit a high of 837.29 on Wednesday, but still far from my adjustment point of 868.00. No time to panic.

Plan for the week

I would like to sell RUT Puts, which combined with the Calls already shorted would make up an Iron Condor. But I refuse to do it right now. I need the market to be a little more oversold for that. If RUT goes down to 800, selling the 740 or 735 Puts would be a very nice and comfortable position to be in.

As for selling Calls, I will only do it if we go to overbought territory. In which case I would like to sell the SPY 150 or 151 Calls. That could happen if SPY hits 145ish. Then selling the 150/152 Call spread for 0.25 or better would be a nice idea to consider.

If we remain in this limbo of a market going no where, then I will probably stay put again this week without adding any new positions.

Finally, if RUT hits 868, my adjustment point, I will close the spread for a loss and re-open another Call Credit Spread further up probably in the 880/885 neighborhood for similar or better credit (0.70)

Market conditions right now

As the market moved up this week, it was clearly losing momentum, reflected by the bearish divergence between a price making higher highs and oscillators making lower highs.

(Click on image to enlarge)

But maybe that's all the pullback that bearish divergence is going to give us? We don't know. But one thing we do know for sure, and that is We are in no man's land:

- 60% of stocks above their 20 SMA
- McClellan at -11 far from oversold and far from overbought.
- Stochastics at -55 far from any extreme.

There is good room for the market to move either way. Until that happens, I will simply play the "watching game" and remain on the sidelines.

Possible high impact news this week:

Obviously we remain in the middle of the Fiscal cliff negotiations. A definite outcome may move the market with conviction to one of the sides. Apart from that, not too much action during the beginning of the week, and most of the activity concentrated in Thursday and Friday:

Wednesday - US Housing starts and building permits
Thursday - German PPI, US GDP Annualized, Philly Fed Survey, Existing Home Sales
Friday - US Durables ex defense, Durables ex transport, Personal Income and Personal Spending

Good luck this week folks!

I'll be flying to Cuba on Thursday and will be back the 27th (No connectivity there). There won't be a Weekend Portfolio Analysis article next week. A good friend of mine will remain in charge of the currently open RUT Call Credit spread and in case an adjustment is needed I will report it on the site when I'm back.

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