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Saturday, April 26, 2014

Weekend Portfolio Analysis (April 26, 2014)

SPX went from 1865.79 to 1863.40 this week for a small 0.13% loss and my trading activity was limited to a new Iron Condor entered yesterday using SPX 1710/1715/1965/1970 with June options which I entered yesterday.

S&P500 is now up 1% for the year. The Dow Jones is down 1% and the Russell 2000 is down by 3.5%. Who would have guessed that when all pundits were forecasting a strong year after a +30%  2013. Well, not so far. We're almost 1 full third into the year, and the markets are pretty much flat to slightly down.

Market conditions
Yellow horizontal lines below represent the short strikes of my May SPX Iron Condor and June SPX Iron Condor. That's where I don't want the market to go.
(Click on Image to enlarge)

Stochastics: 82 (overbought)
McClellan: -8 (neutral)
36% of stocks are trading above their 20 Day Moving Average (neutral)

No man's land. Neither overbought nor oversold. We're still in a long term uptrend. SPX is still trading inside its long term uptrend channel; right now sitting right there on its 50 day moving average. If the market starts to roll over, I think the first correction won't be as significant as many "gurus" out there forecast. Just looking at the number of issues trading above their 20 MA, only 36% already. I think the floor is pretty close and my target is the lower end of the uptrend channel, 1820 - 1830. I think we rebound from there. But hey, you know I don't like to predict market direction, let alone when we are in no man's land territory! As an options seller I'm just trying to predict where the market won't go. I think that's the key.

RUT in particular has been showing some weakness lately, consistently making lower highs and lower lows.  It broke its uptrend channel and a potential new downtrend channel is being formed that points to a 1040 low by May expiration. Will RUT carry the rest of the market along with it? Who knows. But it is a clear signal of weakness that we hadn't seen in a while.
(Click on image to enlarge)

May Positions
SPX 1695/1700/1960/1965 Iron Condor 93% probability of success, 20 days to expiration. With SPX at 1863 there are no concerns with this position.

RUT 1000/1010 Bull Put Spread Out of trouble. 98% probability of success.

June Positions
RUT 920/930 Bull Put Spread 99% probability of success and well out of the money with RUT currently sitting at 1123.

SPX 1710/1715/1965/1970 Iron Condor 76% probability of success. The trade entered yesterday. Nothing new to say about this one.

All the positions are looking pretty good. Low stress options selling at its best.

Action plan for the week
No new trades for me. With four positions open, it is time to do some baby sitting and let time decay do its job. My action will simply be limited to defending existing positions if they are threatened. 3 out of the 4 positions are showing probabilities of success comfortably above 90%. So, I think those won't be a problem. I'll concentrate my attention in the new June 1710/1715/1965/1970 Iron Condor for the next few days, but being a brand new position, it shouldn't present problems in the upcoming week.

Economic Calendar
Monday: US Pending Home Sales
Tuesday: Consumer Confidence
Wednesday: US GDP, ADP Employment change, Chinese Manufacturing PMI
Thursday: ISM Manufacturing PMI
Friday: Non Farm Payrolls, Unemployment change. German Manufacturing PMI

Good luck this week my friends!

Check out 2014 Track Record

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  1. You got a typo in Russell: Russel 2000 is down by 3.5%.

    I currently have the following positions:

    May IWM 104/102
    June IWM 98/96
    June SPY 165/163

    Last Thursday, I closed my May SPY 170/168 for 0.02 debit. I took in .10 credit.

    I will look to sell some more June and July credit put spreads if we can get down to around 110 in IWM as it represents a 4% decline from the 10-day high. I was hoping to iron condor my current May IWM credit put spreads with bear call spreads last week but IWM did not stay above the trigger of 115. I think I have missed my opportunity and will not iron condor my May IWM credit put spreads unless we have a massive rally next week.

  2. Thanks, I added the second L to Russell.
    I'm on the same page as you. I didn't sell RUT Calls. But no regrets my friends. We didn't get the overbought reading needed. RUT's a wild beast.

    Good to know you're doing well with your trades.