After Fridays crazy price action I assumed that we would have an inside to lower day, but that wasn’t the case. All day it seemed like they were working hard trying to push the SPX above 1400, and they all most got there. With that much struggling they ended up selling out there long positions. I feel like we are in no mans land with a high probability of going sideways to lower, my bet is lower. The true dilemma is if you are sitting on cash with no real positions, and the market is at the high end of the range, it would be very hard to allocate capital to this market. I’m sure people might want to wait for better pricing before entering into the market. On the flip side if we get a lot of strength and push above resistance I think we will see a lot of people throwing cash at the market, pushing us to new 2012 highs. So right now I’m looking for strength and if I don’t find it I will be putting on more neutral to bearish positions.
Today I actually started to add neutral to bearish positions on the market. Below is one that I set today. A small skip strike butterfly on SPY.
Now my double dip butterfly that I added on the SPX had a small adjustment today. I took off the lower side butterfly, the reason I did this today was I was actually paying theta to hold that fly. I decided that it would be better to hold on to the other two and increase my theta. Friday is the last day I will hold this, but right now things look ok.