Monday, October 5, 2015

Quick SPY Update 10-5-15

The rally since early last week has been pretty fierce.  I still feel that it likely is a short covering move in a downtrend.

The daily stochastics is moving up from oversold and is mid range right now.  It appears that it would take about 3 more days to become overbought.  That would be a better technical indicator set-up.

 Click on Table to View Stats

I ran a scan with some key criteria which may show up later this week on a further rally in SPY.
Scan Criteria:

  • 3 month EMA below 1 year EMA
  • Weekly MACD below signal line
  • %K 14,3 stochastics is greater than 80
The stats show a greater than 2 times MAX loss versus MAX gain over the following 2-3 months.  The stat table above shows trade stats on the stated set-up and setting a limit loss of 7.75% and a limit gain of 7.75% or exiting the trade at the end of 2 months if neither is reached.

The stats suggest that a short position would be a profitable play on that set-up using the loss limits and profit targets suggested above.  To be clear, this set-up has NOT triggered this week yet.  It did trigger in mid September and is still an open trade by the orders stated above.

Click on Chart to Enlarge

I have showed similar hourly charts of the VIX many times in recent years on the blog here.  Currently we have a dual time frame Bollinger band set-up occurring in the VIX which suggest that stocks are near a topping point here for at least the short term.  The shorter term bottom Bollinger band is below the longer term bottom band, AND price is closing below the bottom longer term band.  This suggests complacency in he VIX/options market relative to the trend over the last couple months.  From an option standpoint, this is a factor which should be supportive of purchasing puts in the near future on scan conditions which have had a historically profitable profile.


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