(Click on image to enlarge)
McClellan: -198 (oversold)
Percentage of stocks above their 20 DMA: 29.96% (oversold)
According to my rules this is a short term oversold market due for a rebound. Of course, nobody knows anything, and the market will do whatever the hell it wants to do. But the rules of my strategy indicate selling out of the money Puts right now, which is a nice thing to do with the VIX above 21. For example you can now sell the SPX January 1780/1775 Credit Put spread with a 90% probability of success. Good odds down there as that would imply a major correction in just a month, during a period that is traditionally strong. Taking into account that the market recently reached a high of 2079, a fall down to 1780 represents 300 points or close to 15%.
SPX 1750/1760/2110/2115 Iron Condor
$340 credit. 98% probability of success. Will expire this Friday for max profit.
SPX 2110/2120 Credit Call Spread
$100 credit. 98% probability of success. Will expire this Friday for max profit.
SPX 1910/1915 Credit Put Spread
$120 credit. 85% probability of success. With a good chance of expiring worthless on Friday. Might need to adjust it if SPX goes down to 1930 or so in the next few days.
SPX 1820/1825 Credit Put Spread
$120 credit. 85% probability of success with 34 days to expiration. I was a little early with this one, but don't feel bad at all. I think 1825 is a decently safe level at this time of the year.
Action plan for the week
December positions are looking good and it should be a peaceful expiration week for me. Unfortunately, I had a loss in the December cycle which will limit my returns. I'm talking about the 2070/2080 Credit Call spread on SPX which I had to adjust back on November 11. So, it won't be a spectacular December, but still in positive territory.
The SPX 1910/1915 Credit Put Spread which I opened on Friday might take some heat if the market keeps falling. But I feel that another 3%-4% fall this week is unlikely, we'll see. In all likelihood I'm done trading 2014 options and I will disclose my final performance for the year next Saturday.
As for January, if I have a chance to sell another Credit Put spread with 90% probability of success, and 0.30 credit in the low to mid SPX 1700's I will gladly do it. If the market falls 1% - 2% this week and the VIX expands a little bit more that will be perfectly possible.
As for Calls, I'm not interested in selling Calls at these levels. So, if the market goes sideways, or even up this week, I won't enter new trades.
Long Term Investing
This week I purchased 49 shares of Suncor Energy at $32.59 (Suncor is one of the Canadian energy titans whose 20 year performance was analyzed as part of the Invest and Retire before you die series.)
Here's the scary chart
(Click on image to enlarge)
I'm now in the process of opening a real money Forex account for automated trading with the LT Trend Sniper strategy, my system for catching long term trends on the EURUSD currency pair. The goal is to have it all set up by January 1st.
This will be my first activity in Forex after my 2011 fiasco which I described in the I have lost my ass article. My broker of choice will be OANDA Canada as Alpari-UK is not accepting Canadian Residents anymore.
I'm optimizing the strategy for other currency pairs as well, but for now, in 2015 I will only trade the EURUSD as it's the one I have been testing for two years.
Not much going on this week.
Monday: HSBC Chinese Manufacturing PMI
Tuesday: European Manufacturing and Services PMI. US Building Permits and Housing Starts.
Thursday: German Business Climate Index. US Services PMI, Philly Fed Manufacturing Index
Good luck this week folks!
Check out 2014 Track record