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SPX expected move for March 5, 2015

The market outlook doesn’t look good for our bull put spread against SPX. If the selling continues tomorrow with the same magnitude, our strikes will be breached and we will have to roll the trade away in time to give this market more time to consolidate.

On Tuesday, there was no reason for selling at all; today, the economic news were also silent giving no catalyst for selling. Were investors taking gains after a nice and long move up? Looks like.

The fight between bulls and bears continued today as well. In the morning a huge sell off took place when market dropped 17 points. That is a significant drop already. But then bears lost control and bulls pushed the market back up. At some point it looked like we would recover all losses and end the session in green.

It didn’t happen.

SPX daily

Later afternoon even bulls lost steam and trading went almost sideways.

Today’s trading changed the bullish outlook back to bearish for the week and it looks like I should have stayed with my original assessment of what the market would do this week and as I posted this in my post “Will S&P 500 go up or down next week?”.

With the retrospective it is now obvious that Monday’s trading was a trap.

SPX yearly move

There is now only two things which may save this trade: tomorrow’s jobless claim report and employment data on Friday. It can also destroy our trade if the report is too good or too bad (you never know what those guys in Wall Street deem as good news and what’s bad news. So let’s hope that data will be good and send market up high again. Let’s hope that data will be that good that investors will see it as a good sign that our economy is improving amid “bad automakers data” we saw as a reason for selling yesterday.

So, what is my expectation? On the low side it doesn’t look well and the outlook is bad. If we see renewed selling tomorrow with the same strength our trade will be breached and we may want to roll it away:

SPX expected move

It will a tough decision to make if we see selling again. If more selling takes place in the morning and in the afternoon the markets recover, there will be no need to roll the trade. If it however falls down and stays there, it may be difficult to roll the trade whatsoever (our trade is marked with a yellow price line at 2080/2085 and the market must stay above 2085 in order to profit from our trade).

Tomorrow is somewhat important for our trade as we may build more cushion for Friday and stay profitable. So let’s see.

Happy trading!

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