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Saturday, November 3, 2018

Weekend Portfolio Analysis (November 3)

Recent Trading Activity

- No Activity.

Market Conditions
(Click on image to enlarge)
Stochastics: 77 (Neutral. Up from 17)
McClellan: +73 (Neutral. Up from -132)
Stocks above their 20 DMA: 49% (Neutral. Up from 14%)

No man's land

Two things happened in the technical picture:

 1. The bullish divergence displayed last week played out despite more weakness early on.

 2. The early weakness early in the week took the S&Ps to the lows 2600's but not lower than that, which we had mentioned here would be an extreme distance below the 200-day average based on history.

Now we are in no man's land, good for neutral plays and volatility is still decently elevated. We have the mid-term elections in the US on Tuesday. A nice volatility decline should take place shortly after. There's a lot of debate as to whether this party winning the House or that party winning the Senate will crash the market or will cause a rally. It's a waste of time to predict such outcomes or waste time reading more noisy articles than necessary. In my short experience, market participants in general dislike uncertainty and chances of a crash after the elections are slim in my view. This reminds me of the 2016 Election where everyone said a Trump win would cause a sell off (which it did, ehem,...only during that night hours, and then it was off to the races). In fact, I alerted about the possibility of a market rally after a Trump win (in this article), based on my experiences from the Obama vs Rodney election of 2012. To me, the VIX goes down after Tuesday, and no sell-off, whatever the outcome. Yes, it may get shaky in the after hours session, but the next day, it will be a cause for uncertainty finally removed.

The Russell Index:
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With solid support (in my opinion anyway) in the 1460 area and first resistance levels around the uptrend line and the 200-day average. I believe we eventually take those before year end.

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. Two weeks to expiration.
(Click on image to enlarge)
Defense lines: 1,425 to the downside (adjust Put side). Call side no longer a concern.

Nov SPX 2450/2440 Credit Put spread
Net Credit: $1300. Two weeks to expiration
(Click on image to enlarge)
Defense line: 2530. Adjust Put spread.

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

Action Plan for the Week

- Consider deploying a December SPX Position if you are not as exposed as I am. In the current conditions that'd be an Elephant. I'm just going to wait until I first remove one of the three Put side exposures, because even though I'm not bearish, the market can always do the most unexpected thing at any moment. So, I'll see if I can close one of the two November Put spreads and then try and deploy a Dec SPX Elephant.

Economic Calendar 

Tuesday: ISM Non-Manufacturing PMI and Employment.
Tuesday: US Mid-term elections.
Thursday: FOMC Statement and Interest Rate decision.
Friday: Michigan Consumer Sentiment & Expectations. PPI.

Good luck this week my friends,

Check out 2018 Track Record

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