Iron Condor, 2 Jalan PJU 1A/7A, Level 7, Oasis Wing, Brunsfield Oasis Tower 3, Petaling Jaya (2026)

18/06/2020

Last week, I had predicted the close of the gap starting from 2960 which it did and it immediately rebounded from there. The huge gap created from the peak has created another gap at the top. The market usually doesn’t like gap. It will attempt to close it. However, the rebound two days ago didn’t close it. Instead, it stayed at 8-MA line which is a resistance, albeit a weak one.

The rebound also created another gap below. Now the market needs to close two gaps; one at the top and the other just below it. If the market fails to close gap at the top which is likely the case, it has created a bearish chart pattern called Island Reversal pattern – a small group of price bars isolated from the prices below. The chart pattern will mean the end of the bullish trend and a reversal is pending.

The premarket is down for over 200 points on the Dow and 20 on the S&P. For this reason, I expect the market to gap open. If it fills the gap to 3060, we have a bearish scenario, further bearish momentum should ensue and thus verify and confirm the Island Reversal. The target will be 2960.

VIX: The VIX stays above the 8-MA which is bullish. This supports the current bearishness of the market.

12/06/2020

The market finally takes a beating and the Dow plunged a whopping 1,861 points; SPX 188 points. It left a huge gap above with long red bar. This should be the beginning of a new, second sell-off that most people are looking for. Most airline, retails, banking sectors are severely hit. This suggests an across-the-board selling.

The SPX chart shows that this one-day drop has crossed the 20-MA (moving average) line – a support. For that, I become short-term bearish. The support line of 2960 does not seem to hold. It should close the gap below starting from 2910 and aiming at 2800 within a couple days.

The premarket at the time of this writing is up 580 points for the Down and 57 points for the S&P. This is a knee-jerk reaction to the humongous drop as the market tries to digest the damage. This phenomenon almost always occurs in big sell-offs. It ultimately succumbs to the selling pressure later. Short it when the market opens. This should be a safe move as we go into the weekend over which buyers are usually hesitant to hold position.

VIX: The VIX jumped, coincides with the market but in the opposite direction. It can move higher if the market continues to fall.

10/06/2020

The market has been bullish for over a week now. Today, the stock market is expecting an announcement from the Fed for more stimulus news, including interest rate and the forecast of the economy. In my mind, I believe the stock market has factored in the expectation. There is a danger that it could be a case of buying the rumor (expectation) and selling the news. The chart pattern does suggest that scenario.

The SPX is reaching for the sky – the strong resistance just hovering a tad higher of the current high. The Fed news can be the mover of the market. It can either push it to over the limit or send it down. The 3260 is the tipping point. Without the news element, the market is ripe for a pullback due to the overbought circumstance. The pressure is there.

However, based on the current market sentiment, it is still a case of bullish market. We should treat it as it is. We do it otherwise only when the market tells us so. If you are a futures or stocks traders, you can only to stay long or go short. There is no other option for trading it different ways. Just wait for the right time to react. If the market reverses, target the first support at 2960.

VIX: The VIX comes off from the high in mid-March to current level of 27. It is at this lowest level since the coronavirus outbreak. This suggests a less panicky market. I tend to think that it will shoot back up.

02/06/2020

Despite the protest unrest, the market remains bullish. SPX is inching up. This is moderately bullish scenario which is suitable for Bull Call spread strategy. Last week’s market narrative should carry forward to this week. Do expect continuing to march higher, with some occasionally pullback which I called it liquidation break. A liquidation break is not a market reversal but rather a retracement to regain momentum – a situation where the weak bulls take profits, usually not accompanied by strong sellers.

As I mentioned before, I don’t see any resistance from here until at least up to 3260 level, barring any unexpected news events. However, 3000 is the support. Every pullback to this level is a buy unless a break of this comes with strong move with increased volume. Keep this in mind. Stay long and keep this market bias for now.

VIX: The VIX find support at 27 level. This is key to understand how the market is going to perform. If it stays at this level, it is supportive of the current bull run. If it bounds off from here, it would be sign of bearish reversal. Do watch it closely.

27/05/2020

The SPX made a strong rally above 3000 level decisively. It is hard to imagine the strength of the financial markets after the humongous selloffs earlier this year. The Covid-19 pandemic is not even close to be considered over. For my trading purpose, the market is officially bullish. Any pullback from here is a buy. Given the pandemic anxiety and the uncertainty of the US economy, it is possible for an alternative view of a sideways to bullish market. But do watch out for strong selloff. Nothing is set in stone for every situation in trading. News can be a market mover. But for now, my market bias is bullish until the market generated information says otherwise.

Now it is also time to look at the next target of the bull run. My first impression is the bottom of the gap on Feb 24. There really isn’t any resistance from current level to that target. A minor resistance can be at 3135, but this is not even considered a strong one. We do need a bit more information to decide where it should be.

In addition to target, we need to determine the support level as well, I see a strong one at 2800. Any pullback from here will target that level.

VIX: So far, the VIX has been confirming the SPX. So, we carry the market narrative forward.

22/05/2020

The SPX is obstinately lingering around the area of 2950-2000 without any breakout. This is a hard resistance with the convergence of 200-MA, upper-band of the Bollinger Band, and the top of the gap that had just been closed a few days ago. It appears that this index will probably continue to stick around for some time. Judging from the movement over the past two months, the SPX snugged in the range between 2800-3000. This is perfect market scenario for an Iron Condor. I will do it with protection.

However, the index may break out from current position to either side, given the unstable market conditions – namely, the Covid-19 and the economic uncertainty. We shall respond to the market generated information accordingly without any bias as to the possible direction of the market. If you are a directional trader, you may want to wait for a breakout and go with the direction.

Nothing has changed much since the last update. So, this will be a short report.

VIX: The VIX has been rather tamed. This confirms the current SPX’s lack of movement enthusiasm.

19/05/2020

Finally, the SPX broke the 2950 level yesterday on the back of the news Moderna’s vaccine trial results show efficacy in Covid-19. The news pushed Moderna’s stock price up close to a high of 30% before retreating to about 20%. The SPX was up 90 points whereas the Dow was 911. The market sentiment seems positive while the US government is in the mood to try to open up the economy.

Based on the price actions alone, the SPX was poised to reverse from 2950 strong resistance. Most indicators were bearish until the news broke. Nevertheless, whether it could move on higher is still up in the air since the euphoria over the vaccine cure is over. More positive sentiment is required to keep the bullish mood high. Although 2950 is the level I watch, this is merely a data point based on the technical indicators I used. Because it was also the top of the gap which is a point most technical traders target, I earmarked it for easy reference. My indicator still shows that the index has not cross the tipping point for bull trend. Potentially, it may reverse from here.

If you are trend trader, this is not the time and juncture to decide. We need more market information before taking position, unless you are in options trading. Today may or may not be the time to decide, either. It depends on the price action. Once the market makes decisive more, it has to be strong with significant momentum and volume.

VIX: Overall, the VIX has been trending down steadily. The current move is confirming the SPX bullish run.

14/05/2020

The SPX attempted to break out 2950 level but failed. It finally led to a big retreat from there. Today is the third day of sell-offs as evident in the 300 point drop in the premarket futures now. I had pointed out the importance of 2950 several times. It has proven to be strong resistance and the bearish market trend remains intact. The bull-run from the low to reach this level is impressive, nevertheless.

The narrative for a bearish view should carry forward. We sell Bear Calls above the 2950 with protection. This should be a strong probability of success. As the market moves lower, we can initiate Bull Put to cover the bullish risk, converting it to Iron Condor again. The target of move from here lower is 2720 as shown on the chart. This is the 50-MA for SPX, a key support. We shall see if it breaches. Then, we will decide the next course of action. Meanwhile, it is possible for the market to make small rally since the sellers have been piling on the sell-offs which at some point they will take profit.

My view is that the break of 50-MA is possible, given the bearish sentiment currently still existing due to the Covd-19 scare. If it breaches, we will try a weekly options strategy to take advantage of the situation.

VIX: The VIX index had moved higher indicating and confirming the current bearish trend.

Summary: SPX turned bearish; volatility spiked up; key support level of 2720 is to watch.

08/05/2020

The April job report is expected to show more job loss and caused more economic pain in the US as CNBC report. However, the market remains bullish, bucking the trend. This is the reason we don’t depend on the news for actions. We go with whatever the market tells us.

The premarket futures is up 200+ points for the Dow, 29 points for S&P, after a volatile trading yesterday which led to the positive close of 211 points up for the Dow and 32 points for S&P. However, don’t be misled by these positive moves. If the market is truly bullish, it needs to move higher in stronger momentum with higher volume. The bulls are clearly cautious.

Chart wise, the SPX is in consolidation mode. The Bollinger Band is narrowing. It means the market is in sideways with potential for either bullish or bearish swing from here. The longer the time spend in this tight range, the greater the magnitude of the swing. Most traders or analysts will try to find the direction of the market with whatever tools they have got. In my trading strategy, I don’t. I will open an Iron Condor options trade with protection. Essentially, I have covered all market directions, including sideways.

For the directional traders, take the bullish position if the SPX trades above 2950; bearish for the breaking below 2800.

VIX: one that the signals the bullish direction of the market is the VIX. It has made new low. This is a bullish sign. Go with this narrative.

05/05/2020

The SPX hit the 2950 resistance line and rapidly retreated from there. This is the critical level I am watching as it would be the tipping point that I call it a bullish market. My trading strategy will change accordingly to reflect that perspective. The index also dropped below the EMA-8. This suggests that it could be looking at moving lower from here. I will move forward with that market narrative for my trading purpose. Nevertheless, the index may hold at this level for now. Hence, I also foresee a sideways scenario. The news will be the mover to make it lower or higher.

Meanwhile, the premarket futures is up 150+ points at the time of this writing. It would be the opportune time to initiate new Bear Call with protection. As soon as it moves away, I can add Bull Put to turn it into Iron Condor to protect my upside risk. We have a target at 2580 if the SPX makes its way down.

VIX: the VIX is at around half way of the uptrend. A support is created. We have no direction opinion on this index at this time.

20/04/2020

The SPX has been on the rise and had broken the resistance level of SMA-50 which is conventional key level. Generally, this is regarded as a change of trend and many big funds can begin to invest again. But given the backdrop of the current Covid-19 outbreak and economic impact of the viral disease, I find it hard to believe that this bullishness will sustain. My own proprietary indicator suggests that the market has not reached the tipping point yet. Roughly between 2900 to 2950 is the resistance for my case. This is also heading up to the top of the gap.

We shall see if it the price will get rejected by the market upon closing the gap over the next couple of trading sessions. If the index reverses will a big red candlestick, this is the sign. I would be ready for a couple of trading options such as Bear Call and single puts.

This is a short commentary for today because we don’t have much to say about today’s market until certain conditions are broken or met. Otherwise, there is no new prediction for where the S&P is going.

13/04/2020

The OPEC+ has reached a historic oil production cut. But the premarket futures still recorded a negative, albeit mildly. This is perhaps the market had already factored in the event as it had moved up pretty decisively over the past few days. The Covid-19 is still making headlines. The fear has not subsided as the US has not seen major breakthrough in lower new cases and/or deaths. Any substantial spike in the new cases may bring the market a few notches down.

The SPX hit a resistance level at this point in time. This is the moment of truth. The index will either change its direction or continue its existing bullish momentum. If the index fails to break out from this resistance, it may come all the way back to the nascent low of 2350. If there is a breakout to the upside, my next resistance level is 2950. We monitor today’s session for direction. Is there a way trade the market at this juncture? I have but not traditional directional trade. I feel a little safe to short my call options at 3000, just a notch above the resistance.

VIX: the VIX appears forming a value (balance) area. It has since come off the peak. For this reason, we may find some stability for the Dow and S&P indexes.

Iron Condor

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