Daily Market Newsletter

Market Internals:  Volume was less-than-average today and breadth ended the day mixed at -39 advancers minus decliners, from the low point of the day at -497 advancers.

SPX Market Timer : The Intermediate line rose above the Lower Reversal Zone, now showing a bullish bias. No leading signals at this time.

DOW Theory: The SPX is in a long term uptrend, an intermediate downtrend, and a short-term uptrend. The RUT is in a long-term uptrend, an intermediate downtrend, and a short-term uptrend. The Dow is in an intermediate downtrend and short-term uptrend.

VIX: The VIX fell to 23.17 after peaking at 50.3 eleven months ago, back inside the bollinger bands. The RVX fell to 26.81 and is back inside the bollinger bands.

Fibonacci Retracements: Now we can start to track the bounce retracement of the SPX swing down from 2800; the 38.2% retracement is at the 2520 level and that was hit on Friday. A much more important confluence level is at the SPX 2575 level. 

Support/Resistance: For the SPX, support is at 2350 … with overhead resistance at 2800 and 2941. The RUT has support at RUT 950 with overhead resistance at 1553. The S&P500, Russell 2000, Dow, and Nasdaq 100 have all printed a Death Cross with the 50ma crossing below the 200ma; this can be a leading signal for a true Bearish move. 

Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 56. The Weekly chart has an energy reading of 41, almost at exhaustion. The Daily chart is showing a level of 38 which is in exhaustion from the swing down. I find it surprising that the monthly chart is even starting to pick up on the downtrend. We were seeing all three timeframes showing big levels of potential energy in early December and this is what happens when all that energy has to find a place to go.  

Other Technicals: The SPX Stochastics indicator rose to 23, above oversold. The RUT Stochastics indicator rose to 18, oversold. SPX MACD histogram rose above the signal line, showing a return of upside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2352 and resistance at the upper band at 2777 with price is above the lower band. The RUT is back inside the Bollinger Bands  with its boundaries at 1250 to 1533 and price is above the lower band.

I have the following positions in play:

• SPY 04JAN 257/258*281/282 Long Iron Condor (12/7) entered for $.18 debits on both the puts and calls, for a total trade debit of $.36. I cleared the put spreads at target $.54 credit (12/17) and will the opposite side call spreads in play to remove as the volatility allows it. Chances are low that we will see the price approach the SPY 280 level this week so any credit that we can sell the call spreads for will be a bonus. 
• SPY 11JAN 247/248*270/271 Long Iron Condor (12/17) entered for $.17 debit on the call spreads and $.18 debit on the put spreads. I closed the put vertical spreads (12/20) for a $.54 credit. I will keep the call spreads in play to look for any kind of positive credit.  
• SPY 19JAN 232/233*262/263 Long Iron Condor (12/21) entered for $.17 debits on the puts and calls. I have placed $.51 GTC credit orders on each “side” of the trade so that if one side fires at a profit target, I will retain the other side for a bounce. 
• SPY 25JAN 231/232*266/267 Long Iron Condor (12/28) entered for $.18 debits on the puts and calls. I have placed $.54 GTC credit orders on each “side” of the trade. 
• SPX 15FEB 2150/2140 put credit spread (12/20) entered for $.80 credit. I will close this position if the delta of the short option hits .45; it is currently showing a delta of .07 on the short option. My target closing debit will be $.10. 

We are scoring good returns on the long condors and our risk is very limited in this extreme volatility. The volatility appears to be coming in somewhat over the last couple of days; this is very normal after the panic low.  

The big opportunity for us would be a relief rally where we could clear our call spreads from the long condor inventory that we hold. The problem at present is that we’ve seen a pretty big vol crush lately. 

We do have one short put spread on the SPX at what I believe would be an unattainable level for this first swing down, but we will manage it by the numbers. I would consider filling a FEB SPX 2820/2830 call spread as long as I could secure an $.80 credit. I am unlikely to fill that order unless we see a huge bounce higher. 

Thoughts on current swing strategies:

• 8/21 EMA Crossover –  Looking for the next signal. 
• RSI(2) CounterTrend –   Looking for the next setup. Lots of these showing now, best to play these during primary uptrend.
• Daily S&P Advancers – Per the 12/24 Trade Update I bought shares of the SSO at $84.35/share (12/24). I will sell this position at SSO 100, or when the RSI(14) hits the 70 level, whichever occurs first..
• Swing – This is earlier than I want to, but I’d like to have some short-delta exposure seeing as how I still have long inventory that has not been cleared out yet. I will add a SPY 30JAN Debit Put Spread, $1-wide, for $.50 or less tomorrow. I will discuss the entry of this trade in tonight’s video. My risk will be limited to the debit paid for this position, and I will look for a 50% return as a profit target.