Ok, so we had some inflation (PPI) data and mortgage apps today but nothing else really happened. Markets had their mojo working in early trading but slowly slid backward all day. After trading down most of the afternoon, markets closed flat excluding the Nasdaq which closed down -0.5%.
Markets appear a little weak to me right here. We've had a hell of a bounce and held the gains nicely. However, I think some exhaustion may be setting in. Markets seem to be waffling back and forth as the VIX drops everyday. This is typical after the drop and bounce we have experienced. Fear has definitely subsided as investors realize it wasn't 2008 during the recent drop. I wouldn't be surprised to see an orderly roll over to head back down and test the lows; actually, that would be the healthiest action.
S&P 1175-1180 is definitely the key level to watch right now. 1180 continues to provide support which I expect to hold through the end of the week. However, I expect this level break next week or the week after prompting a visit to 1150 shortly thereafter. From there, I would expect 1150-1120 to hold which would setup a nice rally opportunity.
The open positions in both the Weekly & Monthly service continue to hold up well as the underlyings remain comfortably above the short strikes. A nice margin of safety exists in the event the selling gathers steam. Assuming the spreads approach expiration on Friday in ITM (in the money) as expected, the spreads will be left to expire, therefore, allowing us to receive the full credit of the width of the spreads upon closing providing maximum profit.
Stay tuned and happy trading!
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