« April 2019 »
SunMonTueWedThuFriSat
 
2
3
4
5
6
7
9
10
11
12
13
14
16
17
18
19
20
21
23
24
25
26
27
28
30
    
       
Today


IVolatility Trading Digest™


Volume 19 Issue 13
Tale of Three Trendlines [Charts]

Tale of Three Trendlines [Charts] - IVolatility Trading Digest™

Trade selection using volatility as the primary criteria. Different trades for different volatility opportunities.
Please read IVolatility Trading Digest™ Disclaimer at the very bottom of this page

To add comments or to ask questions please click here (or use the blog "COMMENTS" link at the very bottom of the blog page).

An equally good title could be "The Battle at 2800 Wall Street" since the 2800 level has become quite a challenge for the S&P 500 Index. The three charts below add some perspective along with some encouragement for the bulls. No April fools verse here.

Review NotesS&P 500 Index (SPX) 2834.40 gained 33.69 points or +1.20% last week with the 50-day Moving Average at 2755.61 just below the 200-day at 2756.29. On any pull back the 200-day Moving Average should provide solid support. A closer look at the operative upward sloping trendline from the December 26 intraday low shows it crosses at about 2860 so it has more to go from this point of view. The charts below add details.

VIXCBOE Volatility Index® (VIX) 13.71 dropped 2.77 points or -.16.81% last week. Our similar IVolatility Implied Volatility Index Mean, IVXM using four at-the-money options for each expiration period along with our proprietary technique that includes the delta and vega of each option, declined 2.56 points or -17.96 ending at 11.69, see below.

table

The volatility and line charts above, show another bullish turn for SPX and implied volatility headed lower once again.

VIX Futures Premium

The chart below shows as our calculation of Larry McMillan’s day-weighted average between the first and second month futures contracts.

With 12 trading days until April expiration, the day-weighted premium between April and May allocated 60% to April and 40% to May for a 14.57% premium vs.2.22 % for the week ending March 22, back into the green zone between 10% to 20% associated with S&P 500 Index uptrends.

table

The premium measures the amount that futures currently trade above or below the cash VIX, (contango or backwardation) until front month future converges with the VIX at expiration. Previously, declines below 10 % and advances above 30% were unsustainable, but for the last year premiums above 10% have been scarce. If there was only one indicator available, it would be a top contender.

For daily updates, follow our end-of- day volume weighted premium version located about half-way down the home page in the Options Data Analysis section on our website.

S&P 500 Index Trendline Update

First this semi-log chart shows the long-term upward sloping trendline, USTL from the March 6, 2009 low at 666.79, with the current close right on the trendline.

table

Zeroing in, this one show it from the February 11, 2016 low at 1810.10.

table

From this viewpoint it has a way to go to regain the uptrend. The difference is likely due to using semi-log charts.

Now for the current operative upward sloping trendline from the December 26 low at 2346.58.

table

From this perspective the upward sloping trendline, USTL crosses at about 2860 so the SPX remains below the operative trendline while tracking it higher. It could get a boost when the 50-day Moving Average closes above the 200-day Moving Average as some algo programs likely use this, or some similar crossover, as one of their buy conditions. Could happen this week. While the USTL could provide some resistance a retest of the October high at 2940.91 seems likely.


Big Data? In options we are Big Data!
For a comprehensive review and reminder check this out
Options: Observations of a Proprietary Trader


Summary

Last week the S&P 500 Index recovered somewhat from the yield curve inversion blues moving back up toward the operative upward sloping trendline after struggling around the 2800 level. Although still below the important trendline, perhaps it will receive a boost when the 50-day Moving Average closes above the 200-day Moving Average triggering some algo buy orders.

Twitter Follow us on twitter for more ideas from our scanners and other developments.

Actionable Options™
We now offer daily trading ideas from our RT Options Scanner before the close in the IVolatility News section of our home page based upon active calls and puts with increasing implied volatility and volume.

"The best volatility charts in the business."

Next week will include some additional details about trendlines and their relationship to option trading strategies.

Finding Previous Issues and Our Reader Response Request

PreviousIssues All previous issues of the Digest can be found by using the small calendar at the top right of the first page of any Digest Issue. Click on any underlined date to see the selected issue. Another source is the Table of Contents link found in the lower right side of the IVolatility Trading Digest section on the home page of our website.

CommentAs always, we encourage you to let us know what you think about how we are doing and what you would like to see in future issues. Send us your questions or comments, or if you would like us to look at a specific stock, ETF or futures contract, let us know at Support@IVolatility.com or use the blog response at the bottom of the IVolatility Trading Digest™ page on the IVolatility.com website. To receive the Digest by e-mail let us know at Support@IVolatility.com

 

Comments:


Permalink

Comments are closed for this entry.


IVolatility Trading DigestTM Disclaimer
IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter constitutes a recommendation to buy or sell any security. Before entering a position check to see how prices compare to those used in the digest, as the prices are likely to change on the next trading day. Our personnel or independent contractors may own positions and/or trade in the securities mentioned. We are not compensated in any way for publishing information about companies in the digest. Make sure to due your fundamental and technical analysis homework along with a realistic evaluation of position size before considering a commitment.

Our purpose is to offer some ideas that will help you make money using IVolatility. We will also use some other tools that are easily available with an Internet connection. Not a lot of complicated math formulas but good trade management. In addition to Volatility we use fundamental and technical analysis tools to increase the probability of success and reduce risk. We prepare a written trade plan defining why the trade is being made, what we call the "DR" (determining rationale) and the Stop/unwind, called the "SU".