Friday, August 15, 2014

Sometimes Simple is Best

As I was getting lost in waves, stochastics, standard deviations and other technical elements of analysis, it's oftentime easy to overlook the obvious!

The daily close chart on the SPY shows the obvious reverse head and shoulders.  As the head is at 191 and the neck line is at 194, the typical "simple" analysis indicates that this move should go to 197.

My earlier "three-week-test-of-the-high hypothesis remains in play as today, Friday, marks the end of the third week.  As options expire today, it could be an "anything goes" kind of market today.

Yet as I see news clips of Russia moving in to Ukraine and other such negative items, I need to be aware that this market could crumble in any instant.  I've been carrying a number of October calls from the low 190s but have been adding September put spreads as we've been moving up.

In the event that the three week test of the high FAILS, although I would give it some extra time next week due to the strong momentum currently in play, a clear failure to take out the highs could quickly send the market to new lows.

It surely is an interesting market full of potential volatility.  My guess is that there is enough time in the options to profit from both the calls and the puts.  The only thing that would crush me is a sudden stall in volatility, but at the rate the market is rallying to regain the highs, I don't see that just yet.

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