Short-Term Reprieve Occurs - Will It Continue?

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 |  Includes: DBA, DIA, EEM, EFA, EWJ, EWY, EWZ, FXI, GDX, GLD, IBB, IWM, IYR, OIH, QLD, QQQ, RTH, SDS, SLV, SMH, SPY, SSO, TBT, TNA, TZA, USO, VXX, XL, XLB, XLE, XLF, XLI, XLU, XLV, XLY
by: Andrew Crowder

The short-term reprieve that I mentioned in a previous report occurred Monday and by the looks of it we could see more downside today.

As I mentioned in the report “as for the current technical picture, all of the major indices and most sectors are in a short-term 'very overbought' state as we head into the week of options expiration. Not only are the major benchmarks in one of the most short-term overbought states that we have seen in quite some time, but we are now hitting strong overhead resistance with two unclosed gaps directly underneath. Combine all of the aforementioned and you can quickly see why the risk/reward scenario leans heavily towards a short-term reprieve next week.”

Now all of our Theta Driver Options Strategy look to be highly profitable. We have one that is to reap the full credit at October expiration Friday and the trade we added last week is now well below the short strike for the November expiration cycle.

For all of you not aware of the Theta Driver Options Strategy, it is a strategy that I have been using for years that due to high demand I recently incorporated into my strategy line-up. It involves the most powerful options strategy there is – credit spreads. More specifically, bear call spreads and bull put spreads. I am able to choose my own probability of success and as well as my rate of return. This is a new way to trade/invest for most investors, so if you have any questions please do not hesitate to email me. I would be more than happy to answer any and all questions that you might have.

Anyway, Tuesday should also bode well for all of our positions as IBM came out with weaker than expected numbers and as I write this futures in all of the major benchmarks are lower. With Apple (Nasdaq AAPL) due out Tuesday after the bell we could see a quick move back to the middle of the two-month range that we have been trading in. If the decline holds as AAPL reports numbers that for some reason do not please Wall Street then we could close the 10/10 gap that was established in almost every ETF. In reality the gap is not that far away. It would only take a 2.5% move in SPY over the next few days for the gap to close. After a 14% rally in nine days a pullback of that degree would not be that out of the ordinary.

Remember, only two weeks ago the market was in free-fall mode. Nothing has changed since that point in time. Yes, the heads of the EU mentioned that they were going to make a plan for a plan, but so far nothing has come to fruition. We are all supposed to know something on the 23rd, but until that point the bearish underlying economic factors remain the same.

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Disclosure: I am short DIA, SPY, QQQ.