Is the water safe to enter a short term, non-directional trade? The SPX chart tells all.
A quick glance at the SPX daily chart clearly tells the story of the day to day volatility we've seen recently. SPX has moved up over 120 points from the low of last Thursday (1835.02), to the high of yesterday (1961.95).
SPX 6 month chart
While the trader side of me wants to enter a new weekly position, the business side of my mind is telling me to practice my risk management, listen to my intuition, and sit on the sidelines. I am not recommending or entering a weekly Iron Condor for the October 5 cycle for several reasons:
- The chart is not giving me any clear direction that we may be in for a few days of consolidation, which would benefit the Iron Condor.
- Next week is the FOMC meeting Tuesday and Wednesday, with the announcement coming out at 2 pm eastern on Wednesday. Any short term trade would need to be closed by the end of the day on Tuesday, or at the latest Wednesday morning. A surprise tidbit of information coming out of that announcement could adversely affect a weekly trade, with very little time to recover.
- Because of the FOMC meeting, decay is usually much slower the days leading up to the announcement because of volatility.
- While I usually don't follow the media hype that closely, any new outbreak of Ebola could cause a major spook in the market, however short-lived it may be.
I will continue to monitor and manage the RUT and SPY monthly positions as per the guidelines, and I will post a position status in my weekend update.
As always, stay keen on your risk management and trade carefully,