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Saturday, September 8, 2018

Weekend Portfolio Analysis (September 8)

This week's analysis has been published at LTOptions.com

Download Weekend Portfolio Analysis (2018-09-08).pdf

If the above link doesn't work for you, simply log in to LTOptions.com, navigate to the "Weekly Analysis" tab and download the document from there.

The Weekend Portfolio Analysis will be available on this site next week for historical reference.

All currently open positions can be seen on the 2018 Track Record page


Previous Analysis now publicly available:
Weekend Portfolio Analysis (September 8, 2018) 
Recent Trading Activity

Market Conditions
(Click on image to enlarge)
Stochastics: 28 (Neutral. Down from 82)
McClellan: -135 (Neutral. Down from +9)
Stocks above their 20 DMA: 44% (Neutral. Down from 62%)

No man's land

Last week we saw that despite the market being higher, all three oscillators had started a move lower. That bearish divergence played out by the book and we are seeing lower prices now. All 3 oscillators are pointing downwards, but they are not too far from their respective oversold levels. Being in No man's land, of course there is more downside potential, but in my view it starts to become more limited without a true market shock, some sort of unexpected event that makes investors overly nervous. Without that catalyst, I'd say 1%-2% lower from here to reach extreme pessimism and then the usual rebound.

Technically speaking, the 2870 level, former resistance, seems to be offering some support. It certainly did on Thursday and early on during Friday's session. But again, I think there is a little downside room and up we go after that. Forecasting such short-term moves is always extremely hard to do. It is fine to have a bias,  but uncertainty is why we play outside the ranges as much as possible, to give ourselves room for error. The index is barely 1.5% higher than its 50-day average, which starts to create a nice upside room.


The Russell Index:
(Click on image to enlarge)
Similar to SPX, the RUT going lower and trading around support, which used to be former resistance. Much closer to its 50-day, which leaves more upside room on an eventual rebound.



Current Portfolio:
The SPY Calls and SVXY Calls expire in December and January of next year. All bullish bets on a market rebound.

Let's now look at the income plays.



Sep SPX/SPY 2645/2650 - 269 Elephant Put side
Net Credit: $1042. Two weeks to expiration
(Click on image to enlarge)
Defense lines: 2,695 to the downside (adjust Put side).



Oct SPX/SPY - 2690/2700/3010/3020 - 274/302 Elephant
Net Credit: $1448. Six weeks to expiration.
(Click on image to enlarge)
Defense lines: 2,750 to the downside (adjust Put side). 2,975 to the upside (close entire Call side at a loss. Keep riding Put side).



Oct RUT/IWM - 1590/1600/1810/1820 - 161/182 Elephant
Net Credit: $1463. Six weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,645 to the downside (adjust Put side). 1,770 to the upside (close entire Call side at a loss. Keep riding Put side).



Action Plan for the Week

- I'm willing to close the Call side of the October SPX Elephant if I can get about a $300 profit (out of a maximum of $384 credit received on that side). So, around 75% of max profit on that side. We are not quite there yet but with some more market weakness and a little time decay it may happen.

- Other than that, just maintenance mode. No plans to enter a new position for now. Just riding existing ones and monitor the defense points, which all seem far enough for the upcoming week in the markets.



Economic Calendar

Tuesday: Europe and Germany ZEW Economic Sentiment.  
Wednesday: US PPI. Beige Book.
Thursday: European Union Finance Ministers Meeting. ECB Press Conference. US CPI. China's Industrial Production.
Friday: US Retail Sales, Industrial Production, Business Inventories, Michigan Consumer Sentiment.

Take it easy folks!
LT


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Check out 2018 Track Record


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