Happy Labor Day!
Three items on the agenda this week: SPX & VIX, NFLX, and GILD
SPX & VIX
The month of August has seen a 4 week surge in stocks on lower than normal volume. That's because many senior traders are on vacation, and junior traders aren't really allowed to make decisions - they just let the algorithms run and make sure they don't get screwy.
As the SPX runs higher into 2000 territory, it's approaching 70 on RSI, a big divergence on MACD, and has already spent a good chunk of time above -20 on W%R. The VIX, meanwhile, is approaching that "complacency rampant" floor of 10.50. Everytime the VIX has dipped below 11 it has jumped right back up, meaning stocks gave up some ground.
This being said, no market correction is coming:
So it's just a trade. The SEP14 1990 SPX puts have been deflated in price very much, they're dirt cheap and aren't accurately pricing risk. Don't trade the VIX, it won't run high enough to make money.
NFLX
NFLX is not rampantly overbought, but it looks like it may make a double top and retreat a bit. Puts here have also been deflated, meaning they're cheap and not accurately pricing risk. Watch this one, it is not ready to be traded.
GILD
GILD is overbought currently and is prime for a small pull back. This can be traded in either direction, buying an ATM put spread (IV is low) or waiting for the pullback and loading long term calls. This company is a dynamo, look at the chart! It has continued to grow earnings and is one of the darlings of the white-hot biotech sector. It's in a very strong uptrend and is going nowhere but up in the months to come, making January 2015 (LEAP) calls very attractive once they come down in price after the impending pullback.
Unrelated, here's a completely arbitrary price forecast for SPX at year end: 2150
How's yours any more accurate?
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