Market Summary
In the past we commented on how the American Association of Individual Investors (AAII) weekly survey is considered a reliable contra-indicator of price direction. The updated survey below fits in with the pattern of stocks moving back toward recent highs as most retail investors are usually wrong about where the market is headed.

The July 15th Couch Potato said "...S&P 500 Index P&F chart below confirms ...upside price breakout failed and started a new downtrend (column of O's on the far right). But don't be surprised if we get a trend reversal next week..." Right on queue the updated chart below identifies the recent uptrend (column of X's on the far rights) and is even flashing a 'buy' signal as the latest column is higher than the previous uptrend. Also note the comment in the chart "P&F Pattern Ascending Triple Top Breakout".

Last weeks article also mentioned "...Expect trading volatility to increase during July option expiration next week...Market watchers will be sitting on the edge of their seats sniffing for a hint of another round of stimulus...Right now the bulls and bears are struggling for control of the market trend with the edge going to the bulls. The major equity indexes dropped back into their trading ranges that began in early June as last week's attempt at an upside breakout failed. But the bulls are resisting the negative news ... and are keeping the bears from taking control..." The smell of more fed action and the shorts getting 'squeezed' when prices move up is keeping the ball in the bull court. But less we forget, as displayed in the weekly S&P 500 index chart right below, at around this time last year stocks were at the level they are now and began crashing soon after.

SPY Position Update
SPY closed at $136.47 on Friday – the July position closed approx. $1,400 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 neutral (see SPY chart)
Moving Average Convergence/Divergence (MACD) is neutral (see SPY chart)

The June 27th Couch Potato published a July expiration SPY bear call spread
On July 18th we suggested closing out the call spread for an approx. $500 gain (see tables below)

The June 25th Couch Potato published a July expiration SPY bull put spread
On July 5th we suggested closing out the put spread for an approx. $900 gain (see tables below)

SPY Risk Analysis
There is no money on the table as all the current SPY positions are closed out and we have not had an opportunity to publish an August trade.

TLT Position Update ---------------------------------------------------------
TLT closed at $130.06 on Friday – the July position closed approx $2,000 in the black
TLT is priced ABOVE its current 14-day EMA (see TLT chart down below)
TLT is trading ABOVE 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 bullish (see TLT chart)
Moving Average Convergence/Divergence (MACD) is neutral (see TLT chart)

The July 16th Couch Potato published an August expiration month TLT bear call spread

The June 21st Couch Potato published a July expiration month TLT bear call spread
On July 18th 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 bull put spread
On July 19th we suggested letting the put spread expire worthless for an approx. $1,200 gain (see tables below)

TLT Risk Analysis
July positions are closed and we have not yet had the opportunity to open an August put spread, therefore the risk Treasury note prices threatening the August $134 strike price call spread

GLD Position Update ---------------------------------------------------------
GLD closed at $153.67 on Friday – the July position closed approx. $1,000 in the black
GLD is priced close to 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 just BELOW 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 July 17th Couch Potato published an August expiration month GLD iron condor

The June 27th Couch Potato published a July expiration GLD put spread
On July 19th we suggested letting the put spread expire worthless for an approx. $1,000 gain (see tables below)

GLD Risk Analysis
Gold's long term trend is bearish and the most probable risk is a price pullback threatening the August $148 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 a 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.

Final Comment
We mentioned above how at this time last year stocks were at lofty levels and began to swoon. Another cautionary indicator is the current VIX level. As displayed in the chart below, the last time the VIX dropped this low was this past May. And of course the equity indexes were at their highs for the year – but prices corrected soon after. The most probable scenario is to expect increased volatility in the midst of earnings season with triple-digit moves up and down.

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.