15 Jan 2023 SPX Weekly - Earnings

Accuracy: 45/50 (90%)

SPX above 3800 - Correct

Changes

Just felt like there could be some changes in my SPX weekly content sequence to make it better. Mainly changing the sequence abit by moving up the economic events above the Next Week section so we figure out what's gonna happen next week before doing the Next Week scenario analysis. Also to include the paper trade play as a regular thing as I felt it was kind of interesting and helps me learn while paper playing the various options combo.  

Paper Trade Review

Last week I did a long call condor as seen above, SPX closed 3999 on Friday and falls into the max profit range. As mentioned last week, the challenging part about this trade is how to deal with the stoploss. As I'm not trading this live, it's really easy to see it develop and expire in the profit zone. But I'm fully aware that during the past few days as SPX had few strong green days, this trade will probably end up in unrealised losses until the very last day. One of the key dilemma to put in such trade, but will see how it goes moving on as I try out more variety and see which kind of trade is more comfortable.

Last Week

First look on daily candle, last week we had 4 bullish days and closing slightly above the downtrend resistance line right at 3999. The momentum towards this area has been pretty strong for these 4 days but I'll say a rejection might still be possible as long as we have yet to hit a higher high above the 4100 area.

Having a zoomed in look, few details we can find here. First is we can see this 4 bullish day seems to have slowed down on Thurs/Friday holding right below 4000.

Another point we see is drawing a fibonacci level all the way to the previous high, the 4000 level is the 61.8% level. Still many possible signs to reject from this level.

Economic Event

As mentioned in the changes, lets do events first before going to what to expect next week.

Last week we had the big CPI numbers but it came right at expected levels and market didn't really responded as much towards a single direction. Instead it fluctuated below 4000 for abit.

Next week, we get several smaller events like PPI and Initial Jobless Claims with a bunch of FOMC/Fed speaking. Don't really see any key catalyst around here, more like additives to wherever the market is going.

Note that Monday is Holiday and no trading on that day.

Earnings

Last week I forgot to mention about earnings, we actually had several banks starting the earnings season that actually caused some volatility to the market. As usual banks are often the first wave of every earnings seasons.

Next week we have more banks and finance sectors releasing their earnings, big names includes Morgan Stanley, Goldman Sachs and Schwab on Tues.

Following up, first few mega cap starting the earning series includes P&G and Netflix on Thursday.

Some of these early earning releases starters tend to move the market more because there are much more anticipation and speculation. But often it's overreaction as subsequent earnings reaction might not follow despite same industry.

Next Week

On the bullish scenario if we break out from the current trend, 4100 might be the target resistance level.

On the neutral scenario, which I kinda lean abit on the downside. We might heard towards 3875 area.

On the bearish scenario, for whatever reason we crash downwards. 3800 seems to be the safe support.

Prediction

I kinda think more towards the neutral scenario mostly, with momentum continuation in mind. Meaning the short term uptrend continues or consolidate in the area until further triggers.

SPX above 3875

Paper Trade Play

Try something different this time. Instead of a Long Call Condor, change the debit call to a credit put instead. Means it's a full credit play of $1.6k.

If SPX expires next Friday:

• at/near 4100 - this is the jackpot scenario, basically I keep full credit of $1600 or minus the offset away from 4100. Basically the hump you see on the profit hump in the risk curve.
• below 4090 - I'll still end up with a profit of ~$110.
• above 4146 - I'll lose depending on how far up SPX went at max of ~$2.9k

The thesis behind this trade aligns with my scenario above. I think SPX could go up alittle, with resistance at 4100. So putting the iron butterfly on 4100 hopes it expires there. While I also think SPX may reject, protecting downside totally in the event SPX doesn't go up I keep the small credit.

Also note the price on optionstrat is quite inaccurate given its not live data, its weekend and it always has wide bid ask. Not forgetting by the time market opens on Tuesday things changes again. So this is really for fun and see what I can learn from it.