UPDATE

Our March position is in pretty good shape for tomorrow's GDP report. An upside surprise will require us to adjust the spreads if we close above the 111 area.

UPDATE

The Market acts like it wants to consolidate around the 50 DMA until the Weekly Claims & GDP numbers come out Thursday and Friday.

 

TRADING SYSTEM SIGNAL - UPDATE

The Market has closed above our adjustment point at the 111 strike and it's time to adjust our trade. We'll go about this gradually since the Stochastic shows we are over bought and due for a pullback on the daily chart:

Calendar Spread

Open - 2 Apr/Mar 116 Call Calendars for about $0.60

UPDATE

A strong reaction to tomorrow's unemployment claims report could be the catalyst to push us through the 111 SPY resistance. A close above that level will be the signal that it is time to adjust our position. However, we'll take the process slowly because the Stochastic shows over bought conditions on both the daily and short term charts.

TRADING SYSTEM SIGNAL - OPEN MARCH POSITION

The Market has retraced about 7% from the January high. I would expect around 10% or more and a test of the 200 DMA before this is over. But of course the Market loves to fool the most people, which is why we prefer to trade non-directional income spreads. With these spreads we don't have to worry which way the Market will go, we only have to know how we will adjust the trade if the Market starts to trend.

Our "window of opportunity" is beginning to open up and it's time to initiate our March position. We are in a Market Structure Stage 3 on the Daily Chart, and a Stage 1 consolidation occurring on the 30m Chart. The VIX is elevated so we need to combine spreads to reduce our Vega risk. So we'll use a "CalenFly" Spread to cover the trading range between the 103 and 111 strikes:

Calendar Spread

Open - 4 Apr/Mar 105 SPY Put Calendars for about $1.00

Butterfly Spread

Open - 2 Mar 107/111/115 SPY Call Butterflys for about $1.00

Hedge the Position

Open - 1 Mar 96 SPY Put at about $0.60 (1 covers all 6 Spreads)

ENTRY WATCH

It's looking more likely that we will enter our March Income Spread Position Thursday or Friday.

Monitoring for March Position

We're 40 days out from March expiration and starting to monitor the market for entry opportunities. We'll probably open the position sometime this week.