Markets Post Biggest Loss In 4 Months, S&P Holds 50 Day Moving Average

Broader Market Weekly Performance:

Dow -2.07%

S&P -2.21%

Nasdaq -2.94%

Russell -2.35%

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MARKET UPDATE:

Markets traded down posting their largest losses in 4 months last week. The triangle pattern highlighted in last week's Market Recap failed to hold its breakout resolving to the downside this week.

This week's pullback has been just that, a pullback; not a panic. The lack of panic, and panic selling, is evident in the VIX. The VIX closed the week at 16.14; below the resistance level of 16.50 highlighted in the chart below.

As evidenced by the VIX chart above, the recent selling has been orderly and contained. Typically, markets rally heading into earnings season. But, coming of recent 5 year highs, the earnings rally may have come earlier than normal. For perspective, markets are only 3% off the QE high of S&P 1474 set a month ago.

The S&P chart below reflects the last 3 months. Friday's close is circled and highlights the S&P successfully holding the 50 Day Moving Average, although slicing through it during Friday's trading session. Regaining and closing above the 50 Day isn't a surprise for a no-news Friday.

The Dow also closed above its 50 Day on Friday. However, the Nasdaq and Russell were not so fortunate this week. Both traded down through and closed below their 50 Days. The Russell lies only 4 points below its 50 Day and can easily regain it. The Nasdaq has suffered the most technical damage of the 4 major indices led by AAPL's recent weakness.

October OpEx arrives this coming Friday and scheduled news (excluding earnings) is fairly light this coming week. If the S&P continues to test the downside it has many levels of support below the 50 Day between 1420 and 1395.

Earnings releases will get into full swing this week and will dominate the headlines. Overall, earnings will be good and should be well received by markets. Corporations are sitting on monster balance sheets and are running very lean and efficient as a result of cost cutting through the economic downturn.

With less than a month left until the election, decent earnings (thanks to an ever lowering expectations), and Bernanke's QE pledge to support markets, a strong decline is not expected.

Navigate wisely and stay profitable, my friends. Happy trading!

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BOOKINGALPHA UPDATE:

Monthly Trading Service Commentary:

We opened our final portfolio position this week using an Oct bull put spread on the Russell 2000. We wanted to Iron Condor the position by selling calls but did not get the opportunity to do so as the week wore on.

The other portfolio positions utilize back month Nov expiration strikes and are performing very well heading into Oct expiration. We may start closing these Nov trades as early as this week for profit. If we don't get the opportunity to close them this week they will likely be closed the following week as we move into new positions.

We continue to improve our site functionality and have now listed Open Trades on the website. In a separate window, login to www.BookingAlpha.com and then click the link below to be taken to the Open Trades Page.

Monthly Advisory Open Trades page

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Weekly Trading Service Commentary:

Our SPX Iron Condor (strikes 1410/1415/1470/1475 opened 10/9) expired worthless Friday for full profit of +8.7% in 3 days.

We took advantage of the Friday's volatility to open a new SPX Iron Condor for the coming week. We received a nice credit for the trade and our strikes are placed comfortably above and below strong resistance and support levels.

Weekly Advisory Open Trades page

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