the 1st of 2 debasement gaps from 08' was initiated @ SPY 119.18 which is why you saw all that dancing on friday in addition to weekly purple containment. Closing above the 1st debasement gap in addition to purple containment throws some caution flags up in the air.
It took 26 weeks of sideways action to finally clear the 2nd debasement gap area from SPY 107.15 – 110.34.
It took 41 weeks of sideways action to finally clear the terminal weekly debasement area.
Those looking for clues as which de-leverage pt. will be hit first. Should the $SPX trade above 1218 then the probability increases significantly that the $SPX is @ it's next resting area. Meaning sideways action for a considerable amount of time. Should we not get a hard reversal this week then you can look to late 05' to early 06' to see what kind of boring market we're in for.
The bad news is for traders in general, volatility is compressing to a 20 pt. range for the entire week.
I think I finally really get it. Thanks so much for your time Red and have a good day at work. If we open below 1192.22 I will initiate the position and if not, I will hold off until the end of the day.
June S&P E-mini Futures: Today's range estimate is 1188 – 1200. I think a break of 20-30 points will begin this week from approximately the 1200 level.
1183 -1191.75 actual last Friday (8.75 points) 1198.50 high last night 1188-1200 estimate for today (12 points) 1192 currently, so estimate is -4 to +8 from here (bullish)
The ideal situation is for the market to close at 106 on opx. But, that's not likely to happen. So, you know that you can't make any more money if the market goes below 106, so you will close out your spread when it hits 106… regardless of when it hits that target.
The closer it is to opx, the less it will cost you to buy back the 106, and that's why you want it to expire at 106 (making it worthless) exactly on opx.
But, that's not likely to happen. You know that the market makers will rally the market before opx (usually 1-2 weeks prior),so that they don't have to pay out all those people who went short at higher levels above 106.
There could be a whole lot of people who go short at 110, and making that strike price the one with the highest open interest (example only). They would rally back up to close at 110 then, so they wouldn't have too pay those people any money.
If that happen, of course your 106 would still expire worthless (just like it would at 107, 108, 109 or 110), but you would lose $4 per contract on your 119's.
Instead of selling them at 106, when they would be worth $13 (119-106), you would only get $9 (119-110) for them. So, the point is simply this… the max you can get from the 119's is $13, which you can't get unless the market closes at 106 on opx.
That's rare, so I wouldn't count on it to happen. Instead, just remember to close out the position if the market hits 106, regardless of when it hits it.
Here's a chart showing the debasement in 08' relative to where the SPY likes to rest (move sideways).
http://www.flickr.com/photos/47091634@N04/45148…
the 1st of 2 debasement gaps from 08' was initiated @ SPY 119.18 which is why you saw all that dancing on friday in addition to weekly purple containment. Closing above the 1st debasement gap in addition to purple containment throws some caution flags up in the air.
It took 26 weeks of sideways action to finally clear the 2nd debasement gap area from SPY 107.15 – 110.34.
It took 41 weeks of sideways action to finally clear the terminal weekly debasement area.
Those looking for clues as which de-leverage pt. will be hit first. Should the $SPX trade above 1218 then the probability increases significantly that the $SPX is @ it's next resting area. Meaning sideways action for a considerable amount of time. Should we not get a hard reversal this week then you can look to late 05' to early 06' to see what kind of boring market we're in for.
The bad news is for traders in general, volatility is compressing to a 20 pt. range for the entire week.
And that is probably the best time to short!
At this point… it seems like suicide to go short at any level.
I think I will go short at Carl's projection – around 1204 on the S&P since we didn't open below that key level of 1922.22.
Poor Smokey drown today it seems… You know they will close this day out above 11,000. Total Insanity!
Thanks Earl of.
I think I finally really get it. Thanks so much for your time Red and have a good day at work. If we open below 1192.22 I will initiate the position and if not, I will hold off until the end of the day.
Carl’s morning call:
June S&P E-mini Futures: Today's range estimate is 1188 – 1200. I think a break of 20-30 points will begin this week from approximately the 1200 level.
1183 -1191.75 actual last Friday (8.75 points)
1198.50 high last night
1188-1200 estimate for today (12 points)
1192 currently, so estimate is -4 to +8 from here (bullish)
Monica,
The ideal situation is for the market to close at 106 on opx. But, that's not likely to happen. So, you know that you can't make any more money if the market goes below 106, so you will close out your spread when it hits 106… regardless of when it hits that target.
The closer it is to opx, the less it will cost you to buy back the 106, and that's why you want it to expire at 106 (making it worthless) exactly on opx.
But, that's not likely to happen. You know that the market makers will rally the market before opx (usually 1-2 weeks prior),so that they don't have to pay out all those people who went short at higher levels above 106.
There could be a whole lot of people who go short at 110, and making that strike price the one with the highest open interest (example only). They would rally back up to close at 110 then, so they wouldn't have too pay those people any money.
If that happen, of course your 106 would still expire worthless (just like it would at 107, 108, 109 or 110), but you would lose $4 per contract on your 119's.
Instead of selling them at 106, when they would be worth $13 (119-106), you would only get $9 (119-110) for them. So, the point is simply this… the max you can get from the 119's is $13, which you can't get unless the market closes at 106 on opx.
That's rare, so I wouldn't count on it to happen. Instead, just remember to close out the position if the market hits 106, regardless of when it hits it.
Not gonna do it.