Sideways Chop, You Following Me?

Are you following BookingAlpha on Twitter? Check us out at @BookingAlpha and gain even more insight to our thoughts, plans, and trades. Today was day 3 of the sideways chop. Markets continue to meander on less and less volume. Economic data and Eurozone headlines are quiet this week providing the market a vacuum with which to chop sideways. The volume-less chop is occurring near market highs of S&P 1400. The 3 major indexes are sitting at their daily upper Bollinger Bands and high above short term and longer term trendlines (5, 10, 13, 20, 50, 100, 150, 200). Psychologically "large round numbers" are also in play ; for example: S&P 1400, Dow 13,000, Nasdaq 3000. Even the Russell is wrestling with the 800 mark; although it has substantially lagged the other indexes recently - this is typically very bearish, just sayin'. So what does all that mean? We think there could be one last push higher to suck in the last of the longs. However, now, much less after a push higher, is not the place to get long. Getting long should have happened around S&P 1350-1360, not >1400. From a portfolio point of view, we have 2 August bear call spreads in the Monthly Trading Service that are getting a little tight with the recent run up. Typically we would have adjusted these spreads before now. However, we have held off adjusting due to the magnitude of the recent rally. Why? Because: 1) The rally has no real reason for such a large move (nothing has changed) and, 2) The size of the rally has been too far too fast. Further supporting our decision to pause on adjusting is the fact that we can roll both spreads up and out (up to higher strikes and out to Sept expiration) for net credits. This means we can generate additional credit, beyond the initial credit received for opening the spreads, with the adjustment. That is a beautiful thing! We are only able to do so because the spreads were originally opened very opportunistically; we received $0.21 and $0.22 for the 2-strike wide spreads originally under different market conditions (higher volatility, more time to expiry, etc). The Weekly Trading Service got net short yesterday picking up some SPY puts in anticipation of pullback. August expiration was used and very little extrinsic premium (premium paid beyond the amount of the option ITM) was paid so we have nearly no Theta (time decay) working against us. Bottom line: We are happy holding both Monthly Service bear call spreads and the Weekly SPY put as is. When the market circumstances change, we will react accordingly. If jobless claims are good enough to break the markets higher tomorrow then we will most likely have to adjust the bear call spreads, depending on the action. But, that is fine with us as we expect to get paid to do so while also resetting our risk. Thanks to everyone and have a great evening!!!