Daily Market Newsletter

Market Internals:  Volume was less-than-average today (but still higher than summer tape) and breadth ended the day modestly positive at +194 advancers minus decliners, from the high point of the day at +323 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 19.84 after peaking at 50.3 eleven months ago, inside the bollinger bands. The RVX fell to 23.80 and is 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 broken through on Friday. A much more important confluence level is at the SPX 2575 level and the price almost hit that level toda. 

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 57. The Weekly chart has an energy reading of 45, recharging again. The Daily chart is showing a level of 50 which is recharging very quickly from exhaustion, and is also starting to pick up on the move from the recent bottom. A couple more weeks of non-linear movement and we’ll be ready for the next major swing.  

Other Technicals: The SPX Stochastics indicator rose to 59, mid-scale. The RUT Stochastics indicator rose to 57, mid-scale. 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 2374 and resistance at the upper band at 2778 with price is below the upper band. The RUT is inside the Bollinger Bands  with its boundaries at 1268 to 1473 and price is below the upper band.

I have the following positions in play:

• 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. Our edge might be over on this trade in the near term, as long as we see a grinding upside move. I believe I have enough inventory for now. I will start to add more as the energies increase/recharge and the price approaches my upside targets.

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. 

I have been adding long condor inventory on Fridays lately to anticipate the big Monday moves, however I think I have enough inventory for now. 

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 still cannot fill spreads at that level yet, even into the MAR cycle….so I’ll hold off for now. 

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 sold half of this position at the SSO $97.67 level, (1/8) booking a $13.32/share profit on that first half. I will sell the rest of this position at SSO 100, or when the RSI(14) hits the 70 level, whichever occurs first. I would set a stop loss on the last half of this position at the SSO $88 level, which represents the last “higher low.” 
• Swing –  I have the following positions: 
  • SPY 30JAN 247/248 debit put spread (1/3) for a $.42 debit. I will look for a 50% return. 
  • AAPL 25JAN 157.5/160 debit call spread (1/7) entered for a $.44 debit. I closed this position (1/9) for an $.87 credit; after commissions, this gave me a $39/contract profit or an 88.6% return on capital.