SPX fails to break through resistance.
Dear valued subscribers,
For the past few trading sessions, the SPX attempted to rally but was stopped by the lower trendline, which stretches all the way back to August 2006 (See chart 1). For the past few months, the S&P500 (SPX) had been steadily trending upwards along the channel. The lower trendline acted as support while the upper trendline acted as resistance. Things started to fall apart on the first trading day of 2007, when the SPX closed a whisker below the lower trendline. Because volume was light, it was difficult to assess if there were institution participation. As such, price action was choppy and erratic. There wasn’t a serious move up or down. Basically the market was treading water. This is the best scenario for our market neutral positions. We have recently closed up all our January positions, which were all profitable.
Chart 1: SPX daily
Chart 2: SPX daily
Not much has changed since then. The market movement still lacks conviction. However, the SPX tested the lower trendline but failed to close above the lower trendline. Instead, the lower trendline now acts as a resistance to the SPX. The SPX is currently in a pivoting point. It is tightly sandwiched between the lower trendline resistance and the 20- and 50- day MA support. When SPX breaks above and close above the 1430+ resistance, it is likely that the SPX will continue its uptrend. However, if the SPX fails to break resistance, it may end up testing the 20- and 50- day MA support at around 1410 level.
We currently have two SPY Feb iron condors. Both are looking healthy at the moment. We also have two more Fen iron condors: one on IWM and the other on RUT. Again, both are looking very good at the moment. I’ve been trying to get filled another Feb SPX iron condor unsuccessfully. It seems like we’ll have to forego an SPX iron condor for Feb.
It is not easy to find a good trade these few days because it is a bit too late to initiate a Feb iron condor with 28 days to Feb expiration. The premium we collect would not be worth the risk we have to undertake. Because Feb premium is decaying fast, double diagonals are expensive. So we’ll have to wait for March expiration to come closer before we can start to stalk Mar/Apr double diagonals and iron condors for March.
