SPY-Triple bottom bounce, but L.T. Bear thesis still strong

22 Jan 2016

SPY



I've been short SPY since 10/27. (I actually jumped in a little early on 8/25) The majority of my success (profits) has come by selling calls. I started selling bear call spreads 11/2 and opened additional positions 11/23 & 12/29. I've already taken the profits from most of my positions. The only position still open is 2 bear call spreads set to expire 2/19 where i am short at $211.

The Daily and Weekly chart shows a triple bottom forming. The pin bar off of ~181 support zone indicates potential for a decent retracement. We could have a move to $200 or more. I big retracement = additional opportunities to go short.

I don't see any compelling evidence to change my bear bias. A move to $215 would be a compelling reason to reevaluate. At the same time, I am not very excited to go short at the current level. I'll wait for a better entry point. It could happen next week.

29 Jan 2016

Catatan

I was hoping for a larger correction this week, but instead SPY has had an uneventful week. With an initial bounce much more subdue than the last 2 previous support rejections, the Bulls must be losing conviction.



In it's current consolidation range and with strong support 182-180, I'll continue to wait for a better opportunity to short. Risk/reward is not great for either longs or shorts.

Next week SPY could:
1. Continue to stay in current consolidation range
2. Retest support zone
3. Continue correction (climb closer to $200)