OptionTradingIQ
New Contributor
Well, stocks just continued their march higher, with another small gain for the week on the S&P 500. It was really a pretty uneventful week which was surprising considering the improved GDP report and important jobs report which was in line with expectorations. While the S&P was up this week, the “risk off†trade seems to be coming back with small caps seriously underperforming in the last few weeks.
Big Ben spoke during the week and the absence of QE3 had a big impact on precious metals with gold and silver both down around 5% on Wednesday.
AAPL had a big gain on Wednesday following the GDP numbers and details of the ipad3 trickling out. Their release date is set for March 7th, but I have a feeling with AAPL being so overbought right now, this will be a “sell the news†type event.
For the general market, complacency still seems very high at the moment. I believe there will be a selloff at some point soon, it's just a question of when and how deep. Puts are being bid up at the moment as traders look to protect their recent gains. The CSFB Fear Index is at a multi-year high which is interesting considering we haven’t even had a decent selloff yet. The spread between VIX cash and VIX futures is also at multi-year highs, another sign that a selloff is expected (doesn’t guarantee it will happen though).
Volatility is very stubbornly staying below 18. I would like to see the VIX back up around 22-23 at which point I will look at some more Iron Condors or Credit Spreads.
The SPX daily chart, shows that stochastics and MACD have started to roll over. I think a test of 1350 is on the cards for next week. Below that, there is support around 1325-1330 which coincides with the rising 50d moving average then below that there is support around 1300 and the 200d at 1275. Time will tell how far we drop, I wouldn’t be surprised if the 1330-1350 level held on the first attempt. The 50d EMA is above the 200d and both are still rising which is bullish.
As mentioned earlier, RUT has been underperforming and has broken below key support. It is approaching the 50d at 790, below that there is strong support at 775 which I would expect to hold if we test it. The 50d EMA is above the 200d and both are still rising which is bullish although they are starting to level off. Keep an eye on this.
Copper has recovered but is still below resistance at $51.20. JJC is still above a rising 50d EMA and is also above a flat 200d. Keep an eye on JJC this week for an indication of broader market direction. The 50d EMA is below the 200 so this is less bullish than the stock indexes, but it looks like we might get a cross shortly. Expect strong resistance around $51.20 - $51.50.
XLF is starting to break above short term resistance, but be careful with this one as stochastics and MACD are both bearish and there is some divergence there also. The 50d EMA and the 200d EMA are rising and the 50 just crossed the 200 which is bullish. Keep a close eye on this ETF as it tends to lead the market. There is strong support at $14.20.
GLD sold off on huge volume this week, I’d like to see a test of the 200d around $160 and then we could maybe look at some bull put spreads if we also get oversold conditions. GLD is right at a flat 50d EMA and is above a rising 200d. There is strong support at the $155 - $160 level.
USO is pulling back after having a good run the last few weeks. Support and $40 held on Wednesday, below that there is support at the 50d EMA at $39 and the 200d at $37.50. The 50d is above the 200d and both are rising which is bullish.
Below is the economic calendar for next week, a fairly important data week with GDP and Jobless Claims likely to have a significant impact on stocks, so trade accordingly!
Until next week, here’s to your ultimate success!
Gav.
Big Ben spoke during the week and the absence of QE3 had a big impact on precious metals with gold and silver both down around 5% on Wednesday.
AAPL had a big gain on Wednesday following the GDP numbers and details of the ipad3 trickling out. Their release date is set for March 7th, but I have a feeling with AAPL being so overbought right now, this will be a “sell the news†type event.
For the general market, complacency still seems very high at the moment. I believe there will be a selloff at some point soon, it's just a question of when and how deep. Puts are being bid up at the moment as traders look to protect their recent gains. The CSFB Fear Index is at a multi-year high which is interesting considering we haven’t even had a decent selloff yet. The spread between VIX cash and VIX futures is also at multi-year highs, another sign that a selloff is expected (doesn’t guarantee it will happen though).
Volatility is very stubbornly staying below 18. I would like to see the VIX back up around 22-23 at which point I will look at some more Iron Condors or Credit Spreads.
The SPX daily chart, shows that stochastics and MACD have started to roll over. I think a test of 1350 is on the cards for next week. Below that, there is support around 1325-1330 which coincides with the rising 50d moving average then below that there is support around 1300 and the 200d at 1275. Time will tell how far we drop, I wouldn’t be surprised if the 1330-1350 level held on the first attempt. The 50d EMA is above the 200d and both are still rising which is bullish.
As mentioned earlier, RUT has been underperforming and has broken below key support. It is approaching the 50d at 790, below that there is strong support at 775 which I would expect to hold if we test it. The 50d EMA is above the 200d and both are still rising which is bullish although they are starting to level off. Keep an eye on this.
Copper has recovered but is still below resistance at $51.20. JJC is still above a rising 50d EMA and is also above a flat 200d. Keep an eye on JJC this week for an indication of broader market direction. The 50d EMA is below the 200 so this is less bullish than the stock indexes, but it looks like we might get a cross shortly. Expect strong resistance around $51.20 - $51.50.
XLF is starting to break above short term resistance, but be careful with this one as stochastics and MACD are both bearish and there is some divergence there also. The 50d EMA and the 200d EMA are rising and the 50 just crossed the 200 which is bullish. Keep a close eye on this ETF as it tends to lead the market. There is strong support at $14.20.
GLD sold off on huge volume this week, I’d like to see a test of the 200d around $160 and then we could maybe look at some bull put spreads if we also get oversold conditions. GLD is right at a flat 50d EMA and is above a rising 200d. There is strong support at the $155 - $160 level.
USO is pulling back after having a good run the last few weeks. Support and $40 held on Wednesday, below that there is support at the 50d EMA at $39 and the 200d at $37.50. The 50d is above the 200d and both are rising which is bullish.
Below is the economic calendar for next week, a fairly important data week with GDP and Jobless Claims likely to have a significant impact on stocks, so trade accordingly!
Until next week, here’s to your ultimate success!
Gav.
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