Tomorrow is expiration day for our SPX bull put spread. Today’s trading bought us a little padding for tomorrow, making our trade safer than what it was yesterday for example. Hopefully this relief will help us tomorrow.
The market is weak and it stayed around $2100 level the whole day today as investor are expecting employment data tomorrow. This weakness along with a few indicators pointing down I expect the market to go down again tomorrow.
There are two things which may help this market to stay where it is or move it higher – employment data and a fact that we are at the mean market value (21 day MA and middle level of the Bollinger band. This is typically an important support (or resistance) and markets tend to bounce from this level to move back up higher. However, the employment data may change everything tomorrow.
With the weakness and a few positive technical indicators my expectation for tomorrow is mixed with downward pressure. The worst case scenario I see here is that the market may go all the way down to 2086 – 2088 level where it should stop (unless the employment report is so bad that it would shoot down though those levels without any stop or brake.
Let’s see if sellers take the control tomorrow or we will see yet another bumpy day with a bunch of ups and downs but without jeopardizing our trade.
And here is a visual look at my expectations:
The light grey box indicates my expected range of move where I expect SPX to stay. The dashed magenta lines indicate three downside levels. The first two higher levels are statistically more common levels, the third lower one is an extreme for the day, so I do not expect that level to be breached. And even if so, it is still above our trade and we should be safe though.
The market is also hovering around 2092 – 2093 level which is a strong support from previous high (reached on December 29, 2014) which may stop the market from further falling.
We will be watching this market carefully tomorrow to see if we need to roll the trade or let it expire worthless for a full profit.
Dis Friday work out as expected? It caught me off guard. I am very long term, so day-to-day doesn’t matter, but I still hate the down days. That is of course until it is up again, and I bought when it was down.
Of course it didn’t work as expected. This Friday was an extreme and based on an irrational fear. Once selling starts it causes more selling and this one broke all supports, therefore I consider it an unusual trading day and I expect Monday to bring a bounce up.