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Saturday, October 27, 2018

Weekend Portfolio Analysis (October 27, 2018)

Recent Trading Activity

Market Conditions
(Click on image to enlarge)
Stochastics: 17 (Oversold. Down from 40)
McClellan: -132 (Neutral. Down from -96)
Stocks above their 20 DMA: 14% (Oversold. Down from 18%)

No man's land but very close to oversold.

In fact the McClellan oscillator, the one in neutral territory was oversold for most of the week.
In the above chart I've highlighted a bullish divergence. Oscillators started to make higher lows as price continued to move lower. I also became curious as to the distance of the SP500 to its own 200-day moving average. We are now almost 4% lower than the 200 day average. We were more than 5% lower than the 200 day at one point in the week. But is that extreme? how frequent is it? I found this:

2 Standard Deviations (2SD) depicts what happens 95% of the time. 95% of the time, the index is between 97% and 112% of the value of the 200-day average. We are currently a little outside of those 2 standard deviations, as the index right now represents about 96% (0.96) of the value of its 200-day average. Notice that it can still go lower, as in early 2016. The 3 Standard deviation interval is at 0.93, that is 7% below the 200-day average. That would put us near SPX 2,600 and potential horizontal support. My take is, we won't go below that in the next month. But when a market gets so vicious who knows. Unfortunately the source doesn't go to an earlier date than October 28, 2013.

The Russell Index:
(Click on image to enlarge)
From high to low the RUT lost more than 16% of its value, approaching bear territory. There is a lot of negativism out there, but I can't help but think a temporary bottom is close. Only time will tell.

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 rest of the positions

Nov RUT/IWM - 1365/1375/1810/1820 - 182 Elephant
Net Credit: $1568. Three weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,435 to the downside (adjust Put side). Call side no longer a concern.

Nov SPX 2450/2440 Credit Put spread
Net Credit: $1300. Three weeks to expiration
(Click on image to enlarge)
Defense line: 2540. Adjust Put spread.

Dec RUT 1350/1340 Credit Put spread
Net Credit: $1400. Eight weeks to expiration
(Click on image to enlarge)
Defense line: 1430.

Action Plan for the Week

- Continue watching for more downside action to defend positions.

- Consider deploying a December SPX Position if you are not as exposed as I am. Selling a December SPX Credit Put spread in the 2300's is very attractive now. It would just add a fourth position to the downside and I will avoid it for now, or perhaps play it smaller than usual.

Economic Calendar 

Tuesday: US CB Consumer Confidence. China's Manufacturing PMI.
Wednesday: Europe CPI. US ADP Non-Farm Employment.
Thursday: US ISM Manufacturing PMI.
Friday: US Non-Farm Payrolls. Unemployment Rate.

Take it easy folks,

Check out 2018 Track Record

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