There was weakness early in the week and we almost reached a short term oversold condition. On Tuesday the SPX rebounded right off the lower end of the long term uptrend channel. To the penny. You know, just to proof that the markets are random (sarcastic). For the record, I haven't redrawn those lines in more than a year.
(Click on image to enlarge)
McClellan: -79 (neutral)
Number of Stocks above their 20 Day Moving Average: 50% (neutral)
From an almost oversold condition we went back to no man's land. Not the greatest time for selling individual credit spreads. In the end I didn't trade last week as the market did not reach the perfect extreme (Number of stocks above their 20 DMA kept hovering around 40%). Yes, I'm being very picky with my entries this year, I know. But a back-tested system is a back-tested system. Now, had we been in a historically stronger period, like November - January, I would have sold Credit Put spreads on Tuesday. Having two of the three elements in oversold territory would have been enough for me to sell Puts during the strongest period of the year, but not entering the summer with the weakest months of the year ahead. In retrospective, it was a pity: the 1820/1825 August Credit Put spread reached 90% probability of success at one point. Could have been a good play. But no regrets. Being disciplined following a system is key and if the market didn't reach the complete oversold condition, it means it rebounded, which at the same time means my Iron Condor positions didn't get any heat and are making me more money. So, all is good.
RUT 1130/1140/1340/1350 unbalanced Iron Condor
Will expire without problems this week. 99.90% probability of success (isn't TOS funny at times?). The performance of the overall portfolio will improve to +13.82% for the year, with 6 more months ahead. Not too bad for zero sleepless nights and very little effort this year.
SPX 1935/1940/2220/2225 unbalanced Iron Condor
88% probability of success and 5 weeks to expiration. With SPX sitting at 2094 I am not concerned about this position. Sleeping like a baby.
Action plan for the week
The RUT June Iron Condor will expire on Saturday morning. The July SPX Iron Condor will not reach adjustment points this week.
As for new positions, I'm not done with the July cycle yet. If we reach an extreme, July will be my go to cycle. On the way down the plan is the same, with SPX falling to around 2070, I would gladly sell the 1900/1895 Credit Put spread for 0.30 credit or better. To the upside, I'm willing to sell RUT July Calls above 1340 in the event that Russell makes a new all time high and hits 1285 - 1290. As usual, I would sell the 10 point wide Call spreads in RUT, expecting no less than 1.00 credit.
And as for August, still a little far for my liking. I'll start planning August positions in two weeks.
Long term Investing
Finally this week I purchased 42 shares of Potash Corp Of Saskatchewan at $37.62 Canadian Dollars. This gem is looking decently undervalued according to its own historical metrics:
POT is currently rated 4/5 by Morning Star and it is offering a very attractive 5.02% dividend yield as I write this.
I now own a total of 127 shares of Potash which have been paying me dividends for two years. The first purchase was this one, in October of 2013. POT has a policy of increasing dividends every year to reward shareholders which has been taken more seriously in the last five years with a spectacular Dividend 5 year Growth rate of 60.86%.
Potash Corp of Saskatchewan was featured in my Invest and Retire before you die series in case you want to know more about the company and its historical performance.
With this purchase I have officially maxed out my TFSA account, and because I don't reside in Canada anymore, I will not accumulate anymore contribution room. So, the next purchases will be the result of cash accumulation via dividends or free capital I get as a result of selling other holdings in the account.
Monday: ECB President Draghi speaks
Tuesday: German ZEW Economic Sentiment. USA Building Permits and Housing Starts.
Wednesday: Europe's CPI. FOMC Minutes.
Thursday: USA Core CPI, Philly Fed Index
Good luck this week folks! Be Lazy. Do not let commissions kill you. Do not over trade. Do not over adjust your positions. See ya!!
Check out 2015 Track record