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Saturday, September 28, 2013

Weekend Portfolio Analysis (September 28, 2013)

SPX went from 1711.44 down to 1691.75 for a -1.15% decline. I didn't trade this week and I consider the market to be in total no man's land right now with plenty of room to move in either direction.

Market conditions
(Click on image to enlarge)
Stochastics: 10 (oversold)
McClellan: +12 (neutral)
66.08% of stocks above their 20 SMA (neutral)
72.81% of stocks above their 200 SMA (overbought)

Middle of the trend channel. My verdict this week is: no man's territory. I consider markets to be usually extremely hard to predict, except when they are at an extreme. Then it is my believe that betting on the opposite usually yields a positive result. But being where it is now, there's no way to predict anything with any edge whatsoever. I you're going to sell options this week, sell well out of the money.

October positions
SPX 1615/1620/1780/1785 Iron Condor. With SPX at 1691, an 80% probability of success and 20 days to expiration, it is looking pretty comfortable.
(Click on image to enlarge)

RUT 1120/1125 Bear Call Spread. This is the most concerning position of all. While the SPX went down this week, the Russell Index was suspiciously strong, ending the week in positive territory (from 1072 to 1074). With an 82% probability of success it is not looking bad though. Just a little concerning.
(Click on image to enlarge)

November positions
SPX 1565/1570/1800/1805 Iron Condor
Right in the middle, couldn't be better. 77% probability of success.
(Click on image to enlarge)

Action plan for the week
Like I said last week, I would like to sell Puts in RUT. It just didn't fall at all this week. I won't sell calls in any index or month at this point. If RUT falls, 1.5% - 2.0% I will be a seller of out of the money puts, and at this point I will probably use November options. If the market rallies, the first position to be threatened will probably be the October RUT 1120/1125 spread. Around 1110 - 1115 I will probably roll up and out to November, complimenting it with some Puts at that point.

Economic Calendar
There's the looming threat of a government shut down on Monday at midnight. I don't even know if that would be good or bad for the markets. But chances are VIX will go up during Monday's trading hours.

Sunday - Chinese manufacturing PMI
Tuesday - US ISM Manufacturing Index
Wednesday - ADP Nonfarm Employment Change
Thursday - Initial jobless claims, ISM Non Manufacturing Index
Friday - NonFarm payrolls, Unemployment rate.

This could be an exciting week folks! Be careful, nimble and enjoy the game!

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