Nov 282015
 

ThanksgivingThe abbreviated trading week was relatively quiet except for a brief increase in volatility early on Tuesday after news surfaced that a Russian fighter jet had been shot down by the Turkish military. However, stocks quickly recovered by the end of the day. The market has struggled to continue the rally that began on November 16th. There continues to be significant resistance between 2120 and 2135, a range that represents highs made earlier in 2015.  If the SPX is able to break above 2097, we may see another attempt to push above the that resistance zone before the end of the year. If unsuccessful, there appears to be reasonable support around 2020. The SPX opened Monday at 2,089.41 and closed Friday at 2,090.11, up just 0.70 or 0.03% for the week.

Chart_112815_SPX

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Nov 212015
 

Market Conditions

Despite last week’s terror attacks in Paris, the financial markets were unaffected. The week of November 16th was the strongest of the year for the S&P 500 with the index closing just 41.65 points below its all-time high. Much of this week’s strength can be attributed to perceived certainty that the Federal Reserve will raise rates in December, because the minutes from its last meeting stated that delaying the first rate hike “could be interpreted as signaling lack of confidence in the strength of the U.S. economy.” This is contrary to what is happening in the overseas markets as Japan had a second straight quarter of contraction, and the European Central Bank is leaning towards expanding its stimulus program in December in response to deflationary risks. Volatility indexes also dropped this week. Chicago Board Options Exchange Volatility Index (VIX) fell below 16 from 20 this past week. The SPX opened Monday at 2,022.08 and closed Friday at 2,089.17, up 67.09 or 3.32% for the week.

Chart_112015_SPX

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Nov 142015
 

Market Conditions

The S&P 500 is once again in the red for the year. The markets declined for most of the week giving back a large chunk of the gains from the previous six weeks. This week’s decline was the largest in twelve weeks as the S&P 500 fell below its 200-day moving average. Helping drive the decline were a handful of weak earnings reports from retailers such as Macy’s (M), Norstrom, (JWN) and J.C. Penney (JCP). Additionally, U.S. sales at retail stores and restaurants rose bu only 0.1% in October from the prior month according to the Commerce Department’s Retail Sales Report. Economists had expected a 0.3% increase. The SPX opened Monday at 2,096.56 and closed Friday near the lows of the week at 2,023.04, down 73.52 or 3.51% for the week.

Chart_111315_SPX

SPX did hold at the 61.8% fibonacci retracement on Friday. It will be interesting to see if this support holds next week, or if the market is going to continue lower.

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Nov 112015
 

mathsSuccessful options trading is based on understanding the statistical probabilities and using those probabilities to create an “edge”.  The Kelly Criterion is one method that traders use to determine the appropriate position sizing for a given trade. The underlying principle is that you should not put all of your money into a single trade, but rather put in an amount that is appropriate given the probable outcome of the trade and the impact that it may have on the overall account. However, position sizing is not the only use for the Kelly Criterion in trading options.

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Nov 072015
 

Market Conditions

Liftoff! A surprisingly strong non-farm payrolls report (271,000 actual vs. 180,000 expected) on Friday pushed stocks down slightly, while boosting the U.S. dollar and hammering precious metals and bonds. The unemployment rate fell to 5.0%, the lowest since April 2008. Average hourly earnings rose by 0.4% from September and were 2.5% higher than a year earlier. It was the highest year-over-year wage increase since 2008. After the robust payrolls report and comments by U.S. Federal Reserve Chair Janet Yellen earlier in the week, the likelihood of a quarter-point fed funds rate hike at the December policy meeting has increased from 58.1% to 69.8%. Equities advanced for the sixth week in a row, and the S&P 500 is now less than 2% below its all-time high. The SPX opened Monday at 2,080.76 and closed Friday at 2,099.2, up 18.44 or 0.89% for the week, but traded as high as 2,116.48 on Tuesday.

Chart_110615_SPX

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