Market Posture Feb 28, 2018 and MARCH STATS

The SPX fell by 3.6 percent from the beginning of February to the end of the month. I gave 16 percent odds that it would and  this was one of the four years in 25 that it fell hard enough.  This will force me to roll my bull put vertical spread out another month for the recovery. Sadly it was at break even two days ago. Now for March. February gave me a 60 percent chance of being bullish from the beginning of the month to the end, but March is even better. My statistics are giving March a 68 percent chance of being bullish. Also, good news as far as I'm concerned, March has an even lower chance of falling more than three percent of its value from the opening quote on the first trading day to the closing quote on the final day of the month - only 12 percent. I very much like these odds particularly because February was bearish.

Since March is typically bullish and has a low chance of falling more than three percent the trade we'll use for this month will be a bull put vertical.

A word about Volatility. When volatility picks up like it has this past month we can expect greater gyrations in price action. Most likely we'll need to adjust our ranges which have been $70 for short-term moves for several months now. We'll want to draw a support line on the charts (everyone may have a different toleration point, so pick yours) and let that be your guide in terms of "things getting out of hand." For me, I'll be uncomfortable if prices fall below and use 2690 as resistance.

SPX Chart:

I've placed an oval around the area of short-term support/resistance - 2690 to 2760. We'll see fairly soon if this 70 point range is going to stay as it has  or if we'll need to widen it.

The weakness I'm seeing in the Market Forecast is that it is right back at 20 today. For bullish strength to progress this line needs to bounce up tomorrow! Whether it does or not we'll also want to see it rise above 80 as it moves higher. If it begins to swing between 20 and 80 we'll likely experience a flat, but very volatile, market. The good news is that so far the FastK line has stayed above 50 since it rose. It may drop below 75, but that is reasonable to expect for short-term, high-volatility moves.

For this week I simply do not want to see the 2690 support break. If you see the Implied Volatility on Short-Term contracts expand to the amount of the longer-duration contracts be very careful and think strongly about hedging.

Craig