What I'm Watching in the S&P 500

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I'm sure there are many other people looking at the trend line of the August lows as an important support line. If that line gets broken, my particular view would be bearish. Multiple overlapping highs and lows like we are seeing off the July lows is not typical of a strong market that is reversing trend.

Looking forward, I would suggest exiting the SSO trade if it closes below last weeks lows. However, I will still use the short-term model to track the exit price.

Pete

SSO trade entry

SSO opened at 61.66 on Wednesday and that is the entry price I will use for tracking this trade.

Pete

Update and New SSO Trade

I wanted to update the QLD trade entered on July 23rd. That trade is still active and doing great. However, I see some signs that the trend may be ready to shift. Move the stop loss order up to 77.00. 72.88 was the entry price, so that is still good profit. Also, I am going to suggest using a limit order to exit this trade at a price of 85.00. So if the market continues to rise the next day or so, I would get out by 85.00.

There is an unfilled downside breakaway type gap around that level. In fact, I'm sure most people wouldn't notice it on the chart because there is no visible gap, but it is there and is unfilled. I would suspect some downside reaction if/after that gap is filled. I would look to enter an inverse ETF at that point, probably QID.

That being said, the short-term model on the S&P is oversold. So I recommend entering SSO tomorrow at the open, but I will be much more cautious about long trades after that.

Pete

Exit GLD options for 278% Gain

The current price of GLD is a little above 84.00 which was may target price for exiting this trade. The 93 put option I suggested is currently at 8.50 up from 2.25 at entry for 278% gain!!!

I am suggesting an exit now, if there has not been an exit yet. So this is the price I will use to calculate the return on the trade.

Pete

QQQQ Update

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Click Chart to Enlarge

Today the short-term model became overbought. It is tempting to suggest an inverse ETF at this juncture, but there are a couple reasons that am not going to.

1) There has been a recent follow-through day indicating uptrending market until proven otherwise

2) Breakout of tight trading range to close above Bollinger Bands

3) Bullish cross on Aroon indicator indicating trend shifting to up


As side notes, I believe that FRO is offering another entry opportunity today after a low volume advance. That would be good for 60 or 55 put options.

Also, I have a couple different strike priced put options on GLD that expire in August. Both are up about 100% or a little less. I have limit orders to sell if price gets to 84.00 on GLD.

Despite the herd mentality to once again look at the pullback in commodities as a buying opportunity around the 200 day MA, I think it is more likely to fail. In my eyes there has been a clear shift in the severity and pattern of price action.

Pete

FRO, GLD Trade Update

FRO gapped down substantially at the open today, so I am going to change the entry price of this option trade to 5.20 which was today's open price. That will more accurately define the risk/reward parameters for anyone in this trade. Obviously it got off to a great start. Stop loss should be set no looser than at 2.60 right now.

I am not in this trade, so right now for trade management sake, I would suggest using a limit order to sell at 150% gain which is 3 times the 50% risk initially. I think that with this big initial move, 100% gain is too conservative. However, if you are willing to immediately set your stop loss to 33% risk, then 100% gain is OK.

The GLD put option I recommended is basically up 100% right now. I would definitely move the stop loss to breakeven or 25% gain. For multiple contracts, it would probably be wise to exit half of them and let the rest ride till expiration or set a 200% sell limit order to exit the second half of the contracts.

Pete

New Option Trade

I am going to suggest a Sept. 60 Put option on FRO. I will use today's (Friday) close to track the trade. The close was 4.70. Stop loss should be 50% on entry. Then use a profit target of 100% gain for exit. As a secondary rule if the trade is not profitable in 5 trading days, exit the trade. There is a short-term head and shoulders pattern forming after a bearish divergence top. Today the stock broke below the up trendline of the right shoulder.

Other options I would suggest are AKS Sept. 60 puts, TOL Sept. 20 puts, BNI Sept. 100 Puts, and ARG Sept. 55 calls. I will not track those on the blog, but if there is any further analysis or explanation anyone would like on these trades, please ask in the comment section.

Other open option trades are GLD put options, QQQQ call option, and TKC call option.

Pete