Just two weeks after facing the abyss, the S&P 500 has retraced nearly 2/3rds of the recent move lower. After capitulative moves like we have seen, this is normal. From here we should expect some testing of recent breakout levels, and we want to see the nature of these pullbacks.
Are they coming with no liquidity and bids dropping out all over the place? Or are buyers going to start showing up into any kind of weakness? That’s what I’m focusing on into next week.
There is a gap right around 2750 that I think will get filled sooner than later. For the market to be constructive, you don’t want to see 2700 lost anytime soon.
Adjustment #1: RUT
This is the last major trade adjustment that needs to be made by November expiration. Just like the others, we are going to roll down and out to December and start selling call spreads to help pay for the cost of the roll.
Trade Adjustment
Buy to Close RUT Nov 1610/1605 Put Spread @4.80
Sell to Open RUT Dec 1600/1595 Put Spread @3.20
Net Debit: 1.60
Then
Sell to Open RUT Dec 1635/1640 Call Spread
Tier 1: Enter at 0.90, Exit at 0.10
Tier 2: Enter at 1.30, Exit at 0.30
Tier 3: Enter at 1.60, Exit at 0.50
Trade #2: GLD
This is an update to a previous trade setup on Oct 31st that never got filled. 115 was tested again, and this is a good spot to scale into some new put spread sales.
Trade Setup
Expected Price: 114.34
Sell to Open GLD Dec 112/109 Put Spread
Tier 1: Enter at 0.43, Exit at 0.13
Tier 2: Enter at 0.63, Exit at 0.33
Tier 3: Enter at 0.83, Exit at 0.53
Trade #3: AAPL
Look for a retest of its most recent earnings low as it attempts to push down to the previous quarter’s gap fill at 190.
Trade Setup
Sell to Open AAPL Dec 180/175 Put Spread
Tier 1: Enter at 0.65, Exit at 0.15
Tier 2: Enter at 0.95, Exit at 0.45
Tier 3: Enter at 1.25, Exit at 0.75