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BookingAlpha Option Trading Advisory

Saturday, December 1, 2018

Weekend Portfolio Analysis (December 1, 2018)

Recent Trading Activity

- No Activity.

Reminder: As explained in the October 13 article, I will stop writing Weekend Portfolio Analyses at the end of 2018. I will keep trading and keeping a track record of the positions as usual.

Market Conditions
(Click on image to enlarge)
Stochastics: 94 (Overbought. Up from 6)
McClellan: +82 (Neutral. Up from -34)
Stocks above their 20 DMA: 54% (Neutral. Down from 36%)

No man's land

Decidedly bullish price action and we are still below the 200-day average. I've been carrying a bullish bias into year end, thinking that support at 2600 would not be penetrated in the rest of 2018. G20 meetings now taking place, out of which Trump will always come out saying he had "fantastic meetings with other world leaders".

As for the Federal Reserve, after been so hawkish and willing to increase rates for the past couple of years, they seemed to have put a break for now, when Powell said this week that,....oh well....rates are about right as they are. Even though they deny it, the Federal Reserve does look at how the markets react, and it is also influenced to some degree by politics. The US Fed and Government have been so used to bullish, calm markets for so long, that at every little decline, the 'pertinent' authorities come to the rescue. As usual, there are dark clouds on the horizon: namely unresolved trade wars, especially with China. I still favor bullish price action into year end. Corporate America has been healthy this year, with impressive earnings growth. The air is changed, in that, I don't think investors believe that it will continue to be up up and away just as easily as previous years, but at least for the remainder of 2018, I believe the markets won't correct in any significant way. We'll see!

The Russell Index:
(Click on image to enlarge)
 Russell has much more work to do to the upside. It also painted a nice double bottom and that area down there around 1,460 has proven to provide strong support. It attracts buyers like a magnet. On the way up, old diagonal support may now act as resistance, but it is still far away around 1600.

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

Dec RUT 1350/1340 Credit Put spread
Net Credit: $1400. Three weeks to expiration
(Click on image to enlarge)
Defense line: 1405. Adjust Credit Put spread down. More active traders can take these gains off the market by now and redeploy that capital on a new position.

Dec SPX/SPY - 2490/2500/2910/2920 - 257/292 Elephant
Net Credit: $1513. Three weeks to expiration.
(Click on image to enlarge)
Defense lines: 2,595 to the downside (adjust Put side). 2,870 to the upside (Close entire Call side at a loss. Keep riding Put side, whose credit is greater than any loss to be suffered on the Call side, resulting in a net winning position in the end).

Action Plan for the Week

- Just watch for potential defense on the existing positions.

Economic Calendar

Sunday: China's Caixin Manufacturing PMI. Last month it was 50.1. A number below 50 would start to indicate Economic Contraction.
Monday: US PMI.
Wednesday: ADP Non-Farm Employment Change. ISM Non-Manufacturing PMI. Fed Chair Powel testifies.
Thursday: Trade Balance.
Friday: Non-Farm Payrolls, Unemployment rate.

Good luck this week folks,

Check out 2018 Track Record

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