The S&P 500 closed under its 50 day moving average– the first time since early November.
There continues to be more distribution and weakness underneath the surface. The major pivot level at 2350 has been lost, and the longer we hold under that level, the higher the odds of a deeper correction.
I’ll tell you this much though… it’s going to be hard to get deeper selling to happen when traders are buying protection like crazy. The VIX broke above 16, and the VVIX cleared 110. If the market sells off, those hedges will close and provide support for the market as they get balanced out.
We’re running hot into earnings season, so we’ll get more signal once vol picks up in those individual names.
Trade #1: AMZN
Pullback to breakout setup. Look for a move into the 20 day moving average at 875 and start scaling in there.
Expected Price: 875
Sell to Open AMZN Jun 800/795 Put Spread
Bid/Ask is wide on this so don’t use LMT orders until we get closer to 875.
Tier 1: Open at .70, Close at 0.20
Tier 2: Open at 1.20, Close at 0.70
No Tier 3 Until After Earnings
If no fill before earnings, we will re-price the trade setup as implied volatility will have shifted.
Trade #2: GLD
125 is a key resistance level that will act as a magnet. If it hits it, I want to start fading the shiny metal.
Expected Price: 125
Sell To Open GLD Jun 132/135 Call Spread
Tier 1: Open at 0.38, Close at 0.18
Tier 2: Open at 0.53, Close at 0.38
Tier 3: Open at 0.68, Close at 0.53