Have a Plan, Trade the Plan
Last week brought all the major indices back to all-time highs, which was not good for the two monthly positions we had on. Our stop loss was hit on the SPY Iron Condor, and Friday's gap necessitated closing the RUT November position for a bit more than the pre-set max loss. Never easy to take those lumps, but it happensâ€¦ and now it's time to move on.
Just glancing at the charts of SPX and RUT, it appears that the market is extremely overbought. There has been no pullback on the steep ascent over the last week; this suggests there "should" be at least a temporary dip in the immediate future. Historically, however, November is the start of the best 6 months of the year.
SPX 6 month chart
"If" that temporary dip does occur in the near term, the next downside support level is 2000 on SPX.
The RUT chart shows a similar picture:
RUT 6 month chart
RUT gained almost 5% for the week, closing Friday at 1173. This close is just below upside resistance of 1175, which I have indicated on the chart.
I've mentioned many times before how important it is to have a plan, and to consistently trade the plan. So, that is exactly how we will move on and get over the lumps we had to digest last week. With no open positions on at the moment, we will see how the market digests the economic news for the week. The calendar is heavy for news releases, being culminated by Friday's monthly Non Farms Payroll report. A summary of the week's events follows:
9:30 am Fed Charles Evans speaks
9:45 am PMI Manufacturing Index
10:00 am ISM Manufacturing Index
10:00 am Construction Spending
8:30 am International Trade
10:00 am Factory Orders
8:15 am ADP Employment Report
9:15 am Fed Narayana Kocherlakota speaks
9:30 am Fed Jeffrey Lacker speaks
10:00 am Fed Eric Rosengren speaks
10:30 am EIA Petroleum Status Report
7:45 am ECB Rate Decision & Mario Draghi Press Conference
8:30 am Jobless Claims
8:30 am Productivity and Costs
12:45 pm Fed Jerome Powell speaks
8:30 am Employment Situation Report
As far as a new weekly trade is concerned for the November 2 cycle, the earliest I would consider venturing in would be Friday of next week after all the week's economic news is digested. With any luck coming our way, we will look for the market to enter some sort of consolidation to allow us to safely venture back into the weekly trade.
As always, stay keen on your risk management and trade carefully,