Market Summary
Looking at the updated S&P 500 Index P&F chart below a column of green X's on the far right confirms that most of the major indexes are in a new uptrend. Stocks surged this week to end the second quarter on a high note and helped trim the major indexes quarterly losses. On Friday the S&P 500 Index had its best day since the middle of last December as the price moved back up to near term resistance. If the S&P 500 Index pushes higher the P&F chart will flash a 'buy' signal as the current uptrend column will exceed the previous column of X's.

The current market rally is 'risk on' as the small cap indexes and tech stocks led the charge and this type of action is needed for continuation of an upside breakout. Most investors believed that Europe's leaders would come up short with reaching any semblance of accommodation to the Euro-bank concerns. U.S. stock futures roared on Friday along with a global rally after European leaders reached agreements that eased concerns about European bank failures. Also, money managers' end-of-quarter portfolio adjustments as quarterly options expired helped fuel Friday's gains and squeeze the shorts into pushing prices higher right up to the close. Both the DOW and S&P 500 are back at the 61.8% Fibonacci retracement of the May high to June low, the point where stocks faltered last week. Stocks are trying to break higher, but until this happens the trend is still range-bound trading.

The Euro zone leaders' agreement to inject funds into ailing banks and further intervene in bond markets is a step in the right direction towards addressing their never ending debt crisis, but this action is probably just a band aid to cover up the symptoms until extensive surgery is done to deal with the root cause of the problem. However, institutional investors appear to be betting on higher stock prices in the near future as evidenced by the CBOE put/call ratio chart below. Traders have moved from mostly buying puts to hedge against a market drop to acquiring calls anticipating follow through on the recent price move.

The June 10th Couch Potato mentioned "... Another indicator that supports higher near-term stock prices is the American Association of Individual Investor (AAII) weekly sentiment survey below. Actually, the AAII survey is considered a contra-indicator as many technical analysts believe the results reflect market extremes. As shown in the table below, retail investors are a lot more bearish compared to the bullish and neutral categories. Technical analysts interpret the bearish reading as a signal of a market bottom and expect movement the other way. Retail investors tend to be 'late to the game' and their bearish sentiment suggest they are selling shares to money managers who have recently bid up prices and pushed the market higher..." Below is the updated survey and those bearish individual investors that held short positions were probably part of the stampede that got 'squeezed' during the rally on Friday. As indicated in the stock charts below, when the June 10th article was published, as suggested, the market rose to recent highs soon afterwards. And of course, this week stocks returned to the highs as the AAII survey is again overly bearish.

SPY Position Update
SPY closed at $136.10 on Friday – the June position closed approx. $3,500 in the black
SPY is priced ABOVE its current 14-day EMA (see SPY chart down below)
SPY is trading ABOVE its 20-day Bollinger Band SMA (see SPY chart)
SPY is priced ABOVE its 50-day simple moving average (see SPY chart)
SPY is ABOVE its 200-day simple moving average (see SPY chart)
Relative Strength Indicator (RSI) is bullish (dee SPY chart)
Moving Average Convergence/Divergence (MACD) is bullish (see SPY chart)

The May 15th Couch Potato published a June expiration SPY bull put spread
On June 14th we suggested letting the put spread expire worthless for an approx. $1,200 gain (see tables below)

The June 6th Couch Potato published a June Quarterly end-of-month expiration SPY bear call spread
On June 25th we suggested closing out the call spread for an approx. $1,200 gain (see tables below)

The June 6th Couch Potato published a June Quarterly end-of-month expiration SPY bull put spread
On June 28th we suggested letting the put spread expire worthless for an approx. $1,100 gain (see tables below)

The June 27th Couch Potato published a July expiration SPY bear call spread (see tables below) . The article actually published lower strike prices for this spread, however the SPY pulled back next morning and the published trade was not available. The article also suggested executing the call spread at higher strikes if prices surged higher which is what happened as the S&P 500 Index rallied on Friday.

The June 25th Couch Potato published a July expiration SPY bull put spread (see tables below)

SPY Risk Analysis
The S&P 500 Index recovered back toward recent highs and if bullish move continues the $138 strike price July short call will be at risk.

TLT Position Update ---------------------------------------------------------
TLT closed at $125.20.40 on Friday – the June position closed approx $900 in the black
TLT is priced BELOW its current 14-day EMA (see TLT chart down below)
TLT is trading BELOW its 20-day Bollinger Band SMA (see TLT chart)
TLT is priced ABOVE its 50-day simple moving average (see TLT chart)
TLT is ABOVE its 200-day simple moving average (see TLT chart)
Relative Strength Indicator (RSI) is neutral (see TLT chart)
Moving Average Convergence/Divergence (MACD) is neutral (see TLT chart)

The May 22nd Couch Potato published a June expiration TLT bear call spread
On June 11th we suggested closing out the call spread for an approx. $900 gain (see tables below)

The June 21st Couch Potato published a July expiration month TLT bear call spread
The call spread is approx. $600 in the black (see tables below)
$136 strike price short call delta is .1132 (89% probability this position will be profitable)

The June 21st Couch Potato published a July expiration month TLT bull put spread
The put spread is approx. at breakeven (see tables below)
$122 strike price short put delta is -.2482 (75% probability this position will be profitable)

TLT Risk Analysis
Treasury bond prices are falling as traders move funds into the recovering equity market. If the trend continues the $122 strike price short put will be at risk.

GLD Position Update ---------------------------------------------------------
GLD closed at $152.64 on Friday – the June position closed approx. $2,200 in the black
GLD is priced ABOVE its current 14-day EMA (see GLD chart down below)
GLD is trading at its 20-day Bollinger Band SMA (see GLD chart)
GLD is priced at its 50-day simple moving average (see GLD chart)
GLD is well BELOW its 200-day simple moving average (see GLD chart)
Relative Strength Indicator (RSI) is neutral (see GLD chart)
Moving Average Convergence/Divergence (MACD) is neutral (see GLD chart)

The June 13th Couch Potato published a June Quarterly end-of-month expiration GLD bear call spread
On June 28th we suggested letting the call spread expire worthless for an approx. $1,000 gain (see tables below)

The June 6th Couch Potato published a June Quarterly end-of-month expiration GLD bull put spread. On June 28th we suggested letting the put spread expire worthless for an approx. $1,100 gain (see tables below)

The June 27th Couch Potato published a July expiration GLD put spread (see tables below) The article actually published higher strike prices for this spread, however gold pulled back next morning and the article suggested executing the put spread at lower strikes if prices gapped lower.

GLD Risk Analysis
We have not had the opportunity to execute a GLD call spread, therefore the risk is gold prices crashing and threatening the $145 strike price short put.

Exit Plan
Anytime the market maker is willing to accept a limit price of less than .11 on one of our short strikes, buy back all the short contracts and sell the long positions on the same spread. However, if it is a few days prior to the expiration date, we may be able to hold out for a .05 bid.

If one of our short strikes is penetrated (closing price above our short call or below the short put) AND the delta rises to .65 we will look to close out this spread (buy the short contracts, sell the long) and roll it out to another short strike price. Unless this is option expiration week, do not panic and rush to close the trade, many times the market will reverse itself and remove the sense of urgency. If one of our short strikes has been violated and there is no price reversal, we cut our losses and live to fight another day.

Exiting these positions prior to expiration we will probably “leg out” of each trade by first unwinding either the bear call spread or the bull put spread; and close out the other side of the spread as a separate order. The timing associated with closing out each side of the credit spreads is dependent on following our Exit Rules described above.

Final Comment
The June 24th Couch Potato Final Comment mentioned "... The S&P 500 Index weekly Heikin-Ashi chart below indicates that stocks may in fact have turned up off the recent correction lows...expect a trend change to range-bound trading. Volatility levels are relatively subdued... Unless something unexpected happens (Fed intervention) we should expect stocks to gyrate in a trading range..." The updated S&P 500 Index Heikin-Ashi chart below confirms that stocks strong quarterly finish notwithstanding, until we get a confirmed breakout most of the major indexes remain range bound.

Happy Trading

Gregory Clay

Couch Potato Trader Disclaimer
All results reported in this section are hypothetical. While the numbers represented here may have been achieved or beaten by our readers, we make no representation that any individual investor achieved these exact results. The tracking for the plays listed in this section uses closing prices for the day the newsletter is published and it is not meant to imply that any reader actually received those prices (though many often do) or participated in these recommendations (even though many do). The portfolio represented here is hypothetical and for investment education purposes only. It is only an illustration of what type of gains a knowledgeable trader might receive utilizing these strategies. If you don't get close to these results, guess what. It isn't the fault of the strategies.