7/11/2008 8:39:48 PM
Our services' net portfolio gain for 2007 was 107.8%! For a full break up of this performance, CLICK HERE.
The system moved into Buy mode earlier in the week.
On June 20th we sold a position in an SPX July 1250(SZPRS)/1240(SZPRQ) Put Option Spread for a net credit of $1.40.
The premium received is $140 per $1,000 of margin required per spread.
SPX Chart - Bigger Picture
In the bigger picture we're in the key support zone now, between 1230 and 1260. While 1250 did not hold this week, a bounce at these levels still remains highly probable. Markets tend to not continue going in one direction without a break every now and then and this one has now dropped for 6 weeks straight and lost 15% in almost 8 weeks!
I know it's difficult to imagine, but these types of markets often lead to some great rallies.
SPX Chart - Smaller Picture
In the shorter term, the "maximum pain" scenario discussed the last few weeks may have climaxed today. The market bounced very strongly off the 1225 level today, which had it climb over 30 points in just 2 hours this afternoon.
There is a lot of pent up energy in the market at the moment and the evidence for a move higher keeps mounting. Notice the divergence that is appearing in the daily chart above, we haven't seen this since the March lows.
With next week being options expiration, the volatility is likely to continue. Also, with the system being in buy mode combined the extreme oversold levels, a move higher is still probable for next week.
For next week, support is 1220 - 1230 and resistance is 1270 - 1290.
With our open July Put Spread, the market is below our sold put strike and we're clearly not in a comfortable position. Given that these options expire at the end of next week, we'll look to close the position on either Tuesday or Wednesday. I'll keep you posted.
The quote this week is from Vincent Van Gogh, "For my part I know nothing with any certainty, but the sight of the stars makes me dream."
Have a great weekend and feel free to email me at email@example.com with any questions or comments.