OptionSpreadTrades.com Weekly Forecast

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Last Week's Trades-
We entered a Bear Call credit spread on JP Morgan back on October 23rd and that is currently the only trade that we are holding. We did have a scare as the stock climbed up to the $42 area, but it has since plunged back to our entry of around $38.00. With 2 weeks to go until expiration we do expect to see this stock take a dive. If the spread drops to about .25 we may decide to exit early as this would give us a profit of 2% on our overall accounts for the month. If not we will hold it until expiration for full profit.

Market Trend
The market trend is still down with a sell signal on the weekly chart from September 4th. However the S&P is technically oversold on the weekly charts with the stochastics below 20 on. To get a technical buy signal the S&P needs to breach 1008.50, which we feel is likely to happen sometime over the next week or so. This would technically put us into a weekly uptrend.

Commercial Traders
The commercials were net sellers on Tuesday, which was the high for the week. Without commercial support we do not expect any sustainable moves to the upside, and once we get out of this technically oversold stage we do expect the downside to resume.

Seasonal Tendencies
There is nothing terribly exciting about the seasonals this week. Friday is typically a bullish day up 66% of the time.

There is a lot of conflicting data, with the technicals looking ready to move up, and the commercials still selling the market. We are still seeing is a consolidation period that we talked about last week. This is likely to lead to sideways to higher markets in the short term (over the next few weeks) However the longer term trend (over the next few months) looks down.

Trades to Take

We did intend on doing an Iron Condor Spread last week, but given the volatility of the market lately and that we are coming into expiration pretty quickly here the Reward to Risk ratio wasn't good enough to justify doing one.

I know that most of you want to take trades right now because you're seeing these big moves, but taking trades just hoping to make money isn't a smart thing to do. Waiting patiently for high probability trades is what we want to do. The fact of the matter is right now the market is making big moves up for a couple of days and then big moves down for a few days. This is great for day traders, unfortunately that is not what we do here.
So what this means is that this month we might only make 5-10%, rather than the 15-20% that we have been. Just remember that's what most people will normally make all year and this year most people will be taking double digit losses on their portfolios.

So again our goal at OptionSpreadTrades.com is not only to help you make money, but also to help you save money, by keeping you out of the markets during the less predictable periods.

Happy Trading,