Recent Trading Activity

Adjusted the Put side of the April RUT Elephant. This resulted in a $2,800 loss. A new credit of $1,200 was obtained. The total credit in the position at the moment is $1,621 with less than two weeks to expiration.

– I intended to close the April SPX Elephant on Friday in order to deploy the second position of the May cycle. However, the fills I wanted were not possible. For this reason, the second position of the May cycle has not been deployed yet and the April SPX Elephant remains open.

Market Conditions
(Click on image to enlarge)

Stochastics: 69 (Neutral. Up from 21)
McClellan: +8 (Neutral. Up from -8)
Stocks above their 20 DMA: 31% (Neutral. Down from 32%)

No man’s land

We are about 1.5% lower than this time last week, and yet the number of stocks above their 20 Day Average almost didn’t move. The first two oscillators have gone up. So, there is a small bullish divergence here. We’ll see how it plays out. But I think the downside room is limited to around 2535-2550 where I’ve drawn horizontal support. By then, all three indicators would be in oversold territory.Market below both its 50 and its 100-day averages.

VIX now at 21.49. Option premiums are attractive and I intend to deploy the second May position early in the week using RUT options.

The Russell Index:
(Click on image to enlarge)

Still in an uptrend and a little stronger than SPX for most of the year.

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 two weeks to expiration.
(Click on image to enlarge)

Defense line: 2,515 (adjust the Put side). 2,870 to the upside.

Apr. RUT/IWM 1365/1375/1670/1680 – 168 Elephant
Net Credit: $1,621 and two weeks to expiration
(Click on image to enlarge)

Defense
line: 1,410 (adjust the Put side). 1,635 on the way up (close Calls at a loss, keep riding the Puts).

May SPX 2250/2240 Credit Put spread
Net Credit: $1,200. Six weeks to expiration.
Very comfortable. Well Out of the Money.
(Click on image to enlarge)

Defense line: 2,360

Action Plan for the Week

– Once again, the main goal this week will be to initiate the second May position. This time it will be early in the week. Possibly Monday. In order to do that, I want to liquidate one of the April positions. I originally wanted to close the SPX April Elephant, but seeing that the adjusted RUT April Elephant is much closer to its max profit potential, I may be inclined to close that instead. The new position to deploy (May options) will use RUT and it will likely be an Elephant unless the market reaches an oversold condition.

– I’ll also close the May SPX 2250/2240 Credit Put spread early if it reaches three quarters of its max profit potential.

Economic Calendar

Tuesday: US PPI. China’s CPI.  
Wednesday: US CPI. FOMC Meeting Minutes.
Thursday: European Central Bank Publishes Account of Monetary Policy Meeting.

Take it easy folks,
LT

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