As I sat in my office late into the evening yesterday pondering what, if any, really useful market analysis I could give members, I got stuck. “Unpredictable”, “news-driven”,...
Wednesday, June 3, 2009
Our reluctance to enter any new calendar positions last week paid off, as the VIX closed down 9% on Friday and yesterday was still more than 6% below Thursday’s close. We’ll have more market analysis after a look at our current positions: SPY Jun/July Double-Calendar Our first June trade closed yesterday at about breakeven—nothing to write home about, but just fine considering that SPY was up more than 6% and implied volatility has dropped…
Sunday, May 10, 2009
We’re on adjustment alert again Monday, after the market continued to test the limits of our May positions last week in terms of both price and volatility. Even as the Dow and S&P rebounded sharply on Friday and the VIX fell another 4%, hitherto stalwart IBM lost ground in an abrupt slide that began with an unremarkable inside-day reversal on Tuesday. Our adjusted IBM position was lifted out of the red when buyers took back control Friday afternoon, but our…
Monday, May 4, 2009
IBM closed at $106.19 today—$0.09 past our original adjustment threshold and well above the $105 level we’ve lowered it to because of the increased upside risk we talked about in last Thursday’s position update. Today’s 214-point gain in the Dow had a significant impact on our DIA positions as well. In light of these developments, we’re leading off this week’s Update with our portfolio positions, starting with IBM: IBM May/June Calendar Spread At the closing bell today, our…
Monday, April 27, 2009
The bulls managed to find another foothold in the “wall of worry” last week, with the S&P 500 Index surging strongly off a triad of support in the 825–830 range (from the 20-day moving average, former downtrend resistance turned support, and the April 9th gap, which was itself a mirror image of the February 17th gap that kick-started the steep decline into March). This level also coincides with a lower channel line drawn parallel to the line that formed the…
Tuesday, April 21, 2009
The post-expiration shake-out yesterday was dramatic—but that’s not surprising, considering how much air was getting pumped into an increasingly leaky balloon. While the media never fail to find reasons why the market does what it does, and we, too, do our best to keep up with the fundamental and economic forces pulling prices in both directions, we also look at the charts for clues about what the market is “really thinking”. For example, last week’s range confirmed a big rising…
Monday, April 13, 2009
The headliner for this week’s update is implied volatility. With April expiration at hand, and implied volatility near its bear-market lows, our focus this week is on our current vehicle of choice—DIA—and the VIX. What stands out on the chart below is the dramatic drop in implied volatility, even as the market fell into Wednesday’s close. We don’t want to read too much into last week’s action, because declining liquidity distorts the market around holidays; however, the…
Monday, April 6, 2009
With last week’s choppy, news-driven trading, the signals we were getting from our short-term indicators were either valid for only a very short time, or were short-circuited entirely. The area we called “The Zone” clearly was at the center of a region of major contention between the bulls and the bears for two weeks, but it’s also clear that the boundaries defined by support and resistance back in January and February have become blurred. This week we’re again going to…
Monday, March 30, 2009
Last week the Dow took DIA within $0.50 of the lower adjustment threshold for our (already adjusted) double-diagonal position before rebounding to close a couple pennies above the adjustment point for our second, double-calendar trade, on Thursday. When the market opened lower Friday morning, we refrained from any action, in accordance with our trading rules, and are being rewarded this morning with the market opening sharply lower. Our benchmark, the S&P 500 Index, reached overbought levels on the daily chart…
Sunday, March 22, 2009
The overbought condition we identified at the beginning of our last Weekend Update was resolved in a short-term reversal this week—but only after a wild ride higher. On Monday the S&P 500 Index backed off the 770–780 resistance zone, retested it on Tuesday and retreated Wednesday morning, then blasted through following the announcement of additional supplies for Helicopter Ben‘s Berlin Airlift of Fed dollars to an economy that remains under siege from frozen credit. From…
Monday, March 16, 2009
The bulls are fiercest at the beginning of a new bull market…or whatever they think might be the beginning of a new bull market—and that’s what makes bear-market rallies so sharp. But bear-market rallies usually don’t last more than five or six days, which means we’re looking for this short-term burst to taper off on Monday or Tuesday. That’s not to say the market couldn’t go higher after some consolidation—this is expiration week, and we had some pretty solid buy…
Jared Woodard is a registered commodity trading advisor who specializes in trading volatility as an asset class. With over a decade of experience trading options, futures ... Read More
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Tuesday, December 6, 2011
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