SPX Credit Spread Trader
- Thread starter El OchoCinco
- Start date
It's about time for another technical look at the SPX. We are at the bottom of our 5-month trading range, and the next few days would be good days for opening up put spreads.
As i said early last week in my previous SPX technicals post, this selloff was widely expected. If times were more normal, i'd be looking here to sell some OTM put spreads according to my 20-30 points OTM spreads strategy but as i mentioned before, i am going to skip a may put position(pretty much the way i skipped a call position in OCT last year) unless we test the 200 MA at 1250-1255. I don't know whether the SPX will reverse from todays low but i do know that its more probable that it continues its down path and leaves the channel over the next week or two. For all the FOTM folks, today would've been a good day to open may put positions or better yet on a reversal tomorrow should that occur.
As i said early last week in my previous SPX technicals post, this selloff was widely expected. If times were more normal, i'd be looking here to sell some OTM put spreads according to my 20-30 points OTM spreads strategy but as i mentioned before, i am going to skip a may put position(pretty much the way i skipped a call position in OCT last year) unless we test the 200 MA at 1250-1255. I don't know whether the SPX will reverse from todays low but i do know that its more probable that it continues its down path and leaves the channel over the next week or two. For all the FOTM folks, today would've been a good day to open may put positions or better yet on a reversal tomorrow should that occur.
Rally:
What is interesting about the chart is that the SPX had strong red candles down each time it hit the bottom of the channel and bounced off. The sell-off could have shaken out all the worries over the oil and Iran and as the market has a short-term memory, perhaps it will find an earnings report reason to boucne off and move higher.
I think we are now looking at an upward bull move overall since October that has been progressively losing steam. Sooner or later it appears a shoe will drop and then it rallies to higher highs. Any failure to bounce off the channel will let me know that this move is over and we will have a new direction for the time being. My MAY short strikes are at 1225 which appear safe for MAY absent any terrorist activities but the recent market activity is making me want more cushion on the downside.
What is interesting about the chart is that the SPX had strong red candles down each time it hit the bottom of the channel and bounced off. The sell-off could have shaken out all the worries over the oil and Iran and as the market has a short-term memory, perhaps it will find an earnings report reason to boucne off and move higher.
I think we are now looking at an upward bull move overall since October that has been progressively losing steam. Sooner or later it appears a shoe will drop and then it rallies to higher highs. Any failure to bounce off the channel will let me know that this move is over and we will have a new direction for the time being. My MAY short strikes are at 1225 which appear safe for MAY absent any terrorist activities but the recent market activity is making me want more cushion on the downside.
Quote from rallymode:
I agree that the steam is just about gone, the RSI confirms it. But where you and i differ is i think the shoe is more likely to drop to the downside this time. It's been my experience that technically speaking when you have an uptrending channel with a dropping RSI at each new high, it's alot easier to break to the downside as it is to break to the upside as each test of the resistance point represents a new high.
I'd say the 1225 short strike is pretty safe unless the earnings season start to unwind in a negative light(quite possible with expectations being so high this time), if we fall off the channel i agree you might want to consider a more serious cushion as there is a long time until MAY expiry, including yet another fed decision which could just as likely say "further cuts needed, no end in sight".
My approach depends on good entries, so i try to avoid high risk entries, and usually dont go against seasonal factors. With you its quite different as you have a quite comfortable cushion. Ideally we go back to 1310-1315 so i can sell may call spreads but i just don't see that happening so easy.
Jessica says: Everything is going to be fine.....
Rally,
It'd be great if you could post a similar analysis with a weekly chart of SPX.
It'd be great if you could post a similar analysis with a weekly chart of SPX.
Quote from rallymode:
It's about time for another technical look at the SPX. We are at the bottom of our 5-month trading range, and the next few days would be good days for opening up put spreads.
As i said early last week in my previous SPX technicals post, this selloff was widely expected. If times were more normal, i'd be looking here to sell some OTM put spreads according to my 20-30 points OTM spreads strategy but as i mentioned before, i am going to skip a may put position(pretty much the way i skipped a call position in OCT last year) unless we test the 200 MA at 1250-1255. I don't know whether the SPX will reverse from todays low but i do know that its more probable that it continues its down path and leaves the channel over the next week or two. For all the FOTM folks, today would've been a good day to open may put positions or better yet on a reversal tomorrow should that occur.
