HashFlare
HashFlare

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Market Conditions
(Click on image to enlarge)

Stochastics: 80 (Overbought. Up from 69)
McClellan: +40 (Neutral. Up from +8)
Stocks above their 20 DMA: 53% (Neutral. Down from 31%)

No man’s land

There’s plenty of room both ways now. My guideline to the downside is 2540 as horizontal support, while I’m still looking at the upper end of the channel as resistance (diagonal red line). Obviously before touching that, the previous swing highs around 2,800 can offer horizontal resistance too.

The index is still below its 50 and 100 day averages. Many, use those as guidelines for potential resistance/support, but I’m not a fan of that approach and I tend to just look at price action and recent inflection points.

VIX still attractive at 17.41 and I intend to deploy the first June position later in the week. In all likelihood, an SPX Elephant.

The Russell Index:
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HashFlare

Clearly stronger than SPX, now above all the main moving averages. I’m looking at potential horizontal resistance around 1,615 (triple top) and still using the lower up-trending diagonal as my guideline for support. I’ll try to deploy positions above resistance zones and below support zones.

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 income plays.

Apr. SPX/SPY 2440/2450/2890/2900 – 290 Elephant
Net Credit: $1,608 and one week to expiration.
(Click on image to enlarge)

Defense line: 2,480 (adjust the Put side). No problems here. Should expire for max profits without hassle.

HashFlare

May. RUT/IWM 1375/1385/1630/1640 – 141/164 Elephant
Net Credit: $1,420 and five weeks to expiration
(Click on image to enlarge)

Defense
line: 1,435 (adjust the Put side). 1,580-1,585 on the way up (close Calls at a loss, keep riding the Puts). It would be a temporary loss, but a eventually an overall gain thanks to the Credit obtained from the Puts being larger than the hypothetical loss taken on the Calls.

Action Plan for the Week

– Let the April SPX Elephant expire for max on Friday.

– Carefully look at the May RUT Elephant for possible closure of its Call side.

– I’ll deploy the first June position late in the week. If we reach an oversold extreme, it will be a Credit Put spread. If we rally hard, and I’m talking about moving 2 or 3% above the 50 day moving average, then I’ll use a 4:1 Unbalanced Iron Condor. If neither of those two things happen, then I’ll deploy an Elephant.

Economic Calendar

HashFlare

Monday: US Retail Sales. Three FOMC Members will speak. China’s GDP and Industrial Production. 
Tuesday: US Building Permits and Industrial Production.
Wednesday: Three more FOMC Members will speak.
Thursday: Philly Fed Index.

Good luck this week my friends,
LT

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