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Below is a past credit spread & iron condor (IC1) advisory to give you a feel for what we cover. For up-to-date advisories, please consider signing up for a free 30 day trial.  


Sunday, June 14, 2015

We are down to the last week for our June trades and our spreads are 2.7% or greater out-of-the-money. Our goal is to hold our trades through the end of this week and let them expire worthless for the buyers, where they'll be 100% profitable for us, the sellers. If anything changes where we might need to take action on one of our spreads, we'll notify everyone via email.

Prediction of where the stock market is heading over the next week: The large-cap stocks (e.g. the S&P 500) will most likely trade choppy to lower over the next week. Cash has been flowing into small-caps, so the RUT will most likely trade sideways over the next week.

Summary of Influences & Indicators for US Equities

Technicals of the major indices - The S&P500 and Dow indices are back below the 50 day EMA, the charts look weak and the indicators are bearish. The big-caps have been negatively impacted by concerns over rising interest rates, a strong dollar, and renewed concerns around Greece exiting the Eurozone. Big-cap technology (NDX) has been holding up well, but the indicators are weak increasing the probabilities that the NDX is going to close below the 50 day line this week. Cash has been flowing into small caps and the RUT is still above the 50 day EMA. Small caps are less sensitive to a strong dollar and rising interest rates. Because all upside breakouts have failed again this increases the probability that the indexes will get stuck in wide, sideways trading channels for a while longer and possibly through the summer.

Technicals and Relative Performance of Specific Industry Sectors - Financials (XLF), Technology (MTK), Semiconductor (SOX), Consumer Discretionary (XLY), Retail (XRT) and Healthcare (XLV) are above the 50 day EMA, which is constructive for the broad market. Financials (XLF) has the strongest chart as it has recently taken out a new high. On the negative, Industrials (XLI) and Transports (IYT) are below the 50 day EMA and the transports sector is a concern as it's a leading indicator. Moreover on the negative, Chaikin Money Flow is showing negative divergence on all of the sectors.

Market Breadth - Breadth indicators such as the number of stocks over the 50 day SMA, new highs, new lows, volume analysis, and advance/decline are weak and point to the indexes (especially big-cap) trading choppy to lower over the next week.

Seasonality - For the past 20, 50 and 100 years June has been mostly a flat month. Historically, January through the first two to three weeks in May is bullish for stocks.

Volatility - Implied volatility for the S&P 500 (VIX) moved higher last week and points to the big-caps trading sideways to lower over the next week. Implied volatility for the Russell 2000 (RVX) is holding near a 12 month low pointing to small-caps trading sideways over the next week.

Upcoming Economic Releases and Events That Could Move the Markets - Industrial Production on Mon the 15th; Housing Starts on Tue and 16th; conclusion of the June FOMC meeting and a decision if they are going to raise interest rates on Wed the 17th; Philly Fed ISM on Thur the 18th.

Economic Fundamentals - The US economy's GDP is growing at +2.0% annualized; the labor market is strong with a recent print of +280k new jobs in May; interest rates are low; inflation is low; energy costs and other input costs are low; the housing market is expanding; the FED is accommodative; companies have a lot of cash on their balance sheets; and the dollar is strong, but we hope it doesn't get too strong. All of this data is a net positive for US equities. On the negative, US economic data was soft in Q1, such as Industrial Production declining for 5 consecutive months and a negative 0.7% number for GDP.

Federal Reserve Policy - The Fed is still accommodative even though there is a very high probability that they'll raise interest rates in September, because of the very strong May job's report showing +280k jobs.

Housing Market - Housing continues to expand and recent data shows that new home starts increased 20%, which was a very strong number.

Spread between High Yield and Treasuries - HYG pulled back over the last week as the probability of the Fed raising interest rates in September dramatically increased after a strong May jobs report. In general, when HYG starts to sell-off, this will usually negatively impact stocks, so this is something that we need to monitor.

European Markets - Most of the Eurozone charts that we follow are above the 200 day SMA. They have pulled back a little, but most likely will recover once Greece negotiates their next bailout payment; this will be wrapped up by the end of June. The ECB is implementing a round of Quantitative Easing and this should gradually push European stocks higher.

Asian Markets - Japan (EWJ), China (FXI) and Hong Kong (EWH) are above their 50 day EMAs and look good. On the negative, India (INP), Taiwan (EWT) and Korea (EWY) are back below their 50 day EMAs. As long as China (FXI) is okay, which it is, there is a low probability that the US market will be negatively impacted by Asian markets.

Corporate Earnings - Q115 earnings is complete; 71% beat on earnings expectations, which is slightly below the 5 year average. However, only 45% beat on revenue, which is about 20 points below the 5 year average, so top line revenue came in weak. The blended, aggregate earnings growth rate was +0.7%, making it the lowest earnings growth rate since Q312.

Valuation - Based on forward projected S&P500 earnings of $125 and the S&P500 index (SPX) at 2092, the price/earnings ratio (P/E) is 16.7, which is elevated compared to historical figures. Historical P/E averages for the S&P500 are the following: 5-year (13.6), 10-year (14.1), and 15-year (16.1). The SPX peaked in 2000 at a P/E of 21. Valuation is no longer cheap and any external shocks could trigger a 5% to 10% pullback.

Ongoing External or Geopolitical Events that Could Escalate Further - 1) Russia could stir up uncertainty at anytime around the Ukraine; 2) Tensions with Iran could escalate as Iran is backing fighters in Yemen and the nuclear negotiations have a deadline of June 30th; 3) Greece continues to talk about exiting the Eurozone and they need to wrap up their negotiations on the next bailout by the end of June. The above ongoing events could cause periodic shocks in Q215 that would increase the market's volatility.

Supporting Analysis

Below are the daily and weekly charts of the Dow Jones Industrial Average. We can see that the Dow closed back below the 50 day EMA and right on the 100 day EMA. All of the indicators are short to intermediate-term bearish. To the downside over the intermediate-term, there is a moderate probability that the 100 day EMA at 17,900 will continue to hold as support. If the 100 day EMA fails, there is a high probability that the 200 day SMA at 17,600 will hold as support. If the 200 day SMA fails, there is a extremely high probability that 17,200 will hold as support, representing past support in December and February. For more on the indicators used please visit the Learning Center.

Below is the daily chart of the S&P 100 index (OEX) representing the 100 largest stocks in the S&P 500 index. The "smart" money trades the OEX along with its options, thus the reason that we need to monitor this index and the values of certain OEX options. As shown below, the OEX closed right at the 50 day EMA. The indicators are short to intermediate-term bearish.

Below are the daily and weekly charts of the S&P 500 index, showing the SPX and the SPY, an ETF that tracks at 1/10th the value of the SPX. We can see that the SPX closed back below the 50 day EMA. The indicators are short to intermediate-term bearish, with the Chaikin Money Flow continuing to show negative divergence. To the downside, there is a moderate probability that the 100 day EMA at 2080 will continue to hold as support. If the 100 day EMA fails, there is a high probability that the SPX will find support at 2040 representing the 200 day SMA and past support in March. If the 200 day SMA fails, there is an extremely high probability that the SPX will find support at 2000. For more on the indicators used please visit the Learning Center.

Below is the daily chart of the NASDAQ Composite Index representing 2700 stocks, making it a proxy for the broad stock market. We can see that this index is still above the 20 day EMA, so it's demonstrating a lot of strength. The indicators are short to intermediate-term neutral to bearish; Chaikin Money Flow and CCI continue to show negative divergence. This increases the probability that this index will also pull back to the 50 or 100 day EMA.

Below is the daily chart of the NYSE Composite Index representing 1900 stocks that are listed on the New York Stock Exchange, making it a proxy for the broad stock market. The companies that reside in this index tend to be higher quality and more established as compared to many of the companies that reside in the NASDAQ Composite Index. We can see that this index is back below the upward sloping trend line, as drawn. All of the indicators are bearish.

Below are the daily and weekly charts for the technology centric NASDAQ 100 showing the NDX and QQQ. We show the QQQ's, an ETF that tracks the NASDAQ 100, because it allows us to see additional indicators, but we primarily trade 10 point wide spreads on the NDX. We can see that this big-cap, technology-heavy index is back below 4483 and the 20 day EMA, but it is still holding above the 50 day EMA. The indicators are short to intermediate-term bearish, and Chaikin Money Flow continues to show negative divergence.

Below is the MDY, and ETF that tracks that S&P400 Mid-cap index. We don't place trades on the mid-caps, but we monitor them to provide us clues to where the cash is flowing into the market. We can see that the MDY is below 280, but it's still above the 20 day EMA demonstrating reasonable strength. The indicators are short to intermediate-term mixed. Cash has been flowing back into the small and mid-cap stocks.

Below is the Russell 2000 small cap index where we show both the RUT and the IWM, an ETF that tracks at 1/10th the value of the RUT. We show the IWM because we can see more indicators, but we primarily make trades on the RUT. We can see that the RUT is above the 50 day EMA demonstrating reasonable strength. All of the indicators are short to intermediate-term bullish. To the downside, if the RUT pulls back there is a good chance that the RUT will find support at 1220 representing the 100 day EMA and support in early May. If the 100 day EMA fails there is a high probability that the RUT will find support at 1200 near the 200 day EMA; this projection is valid for the next two weeks based on the recent rotation of cash moving back into small and mid-caps.

Relative Performance: The charts below show the relative performance of how large-caps (Dow & S&P500), mid-caps (S&P400), small-caps (Russell 2000), and technology (NASDAQ 100 and equal weighted technology, MTK) are trading as compared to the Wilshire 5000 broad market index; i.e. the performance of the Wilshire 5000 index is zeroed out and the gain or loss of each index is on a relative basis to the Wilshire broad market index. One chart shows 30 days and the other 82 days.

A few scenarios of what we are looking for: 1) When small-caps and/or technology stocks are outperforming the broad market, this tells us that investors are "risk on" and the broad market will usually move higher; 2) When small-caps and/or technology stocks are under performing and large-caps are outperforming, it's a sign that investors are becoming "risk off" and moving cash into larger more established companies.

Conclusion for Big-cap, Mid-cap, Small-cap & Tech Stock relative performance: Investors have been moving cash into small-caps and mid-caps. Technology is still outperforming, but it has weakened a little. Some cash has been moving out of biggest-cap companies (OEX and Dow). Because small-caps are outperforming, this is constructive for equities.

Macro-Level, Fundamental View of US Economy's Underlying Health

Below are a selection of macroeconomic indicators to give us a big-picture, fundamental view of the health of the US economy. If/when the US economy begins to weaken per deteriorating macroeconomic indicators and corporate earnings, along with increasing, stair-step volatility, this information will help us: 1) Reduce our downside exposure by opening fewer bull put spreads, and waiting for key economic data before opening certain bull put spreads; 2) Trigger us to possibly open a long term hedge to protect some/all of our bull put spreads; 3) Alert us to possibly start opening bearish directional, speculative trades; and 4) Tell us when it's time to move to the sidelines.

Initial Unemployment Claims, a weekly report that measures the rate of people being fired from their jobs, increased to 279k from 277k. When initial unemployment claims drop below 400k it's classified to be in the "recovery zone" and the economy will usually add +100k jobs monthly. When new claims are near 360k we'll usually see 150k+ new jobs monthly; when it's near 325k it usually represents strong job growth and a healthy economy that is expanding at a GDP growth rate of 3.5% to 4.0%, historically. When new claims drop below 290k, historically, the economy is usually overheating and inflation becomes a problem. (Not this time though as there is still slack in the labor market) The 2nd chart is the 4 week average going back to 1994 showing how this indicator behaves during good times and bad. Overall, it was a good report because new claims have stabilized below 300k, telling us that the labor market continues to improve and that monthly payroll gains should exceed 200,000.

Headline Retail Sales grew 1.2% in May, after increasing an upwardly revised 0.2% in April. After stripping out sales from auto & parts dealers, gasoline stations and building material suppliers, core retail sales expanded 0.6% after increasing 0.3% in April. Consumer spending is important because it represents 2/3rds of the US economy. Overall, it was a good report as consumers decided to save less and spend more in the month of May.

Earnings & Price/Earnings Multiple:

Q115 earnings season is complete; 71% of the S&P500 companies beat earnings expectations, which is slightly below the 5 year average; however, only 45% beat on revenue, which is about 20 points below the 5 year average, so top line revenue came in very weak. The blended, aggregate earnings growth rate was +0.7%, which was the lowest earnings growth rate since Q312. Aggregate earnings growth came in essentially flat for the quarter (i.e. +0.7%), but because earnings estimates were slashed to such low levels, a high percentage of companies beat on earnings, which was a positive for stock prices. This is the earnings "game" that plays out every earnings season.

For fourth quarter 2014 earnings season, Q413 vs. Q414 blended earnings growth rate for the S&P500 companies was 3.7%, 75% beat on earnings, which is above the 5 year average, and 58% beat on sales, which is slightly below the 5 year average. Back to the blended earnings growth rate, Apple, unfortunately, represented about half of the earnings growth, and without Apple the earnings growth rate would have been closer to 1.7%.

For third quarter 2014 earnings for the S&P500 companies, 77% beat on earnings, 59% beat on top-line revenue, and the QoverQ blended earnings growth rate was 7.9%, which was very good.

For second quarter 2014 earnings, QoverQ earnings growth for the S&P500 companies was 7.7%, and top-line revenue growth was 4.4%. Overall, the results were good.

On the topic of Valuation, the current 12-month forward P/E ratio for the S&P500 is 16.7x, based on a price of 2092 (SPX) and a forward 12-month EPS estimate of $125. The current P/E is on the high side of forward looking P/E ratios since 2004, as compared to historical 5, 10 and 15-year figures. Historical P/E averages for the S&P500 are the following: 5-year (13.6), 10-year (14.1), and 15-year (16.1). The SPX peaked in 2000 at a P/E of 21. Some experienced money managers believe that the market won't be classified as overpriced until the P/E touches 18. Other analysts say that because interest rates are low, higher P/E ratios are justified. Regardless, valuation is no longer cheap and any external shocks (e.g. events out of Greece, Ukraine, China) could trigger a 5% to 10% pullback.

Volatility: Below are the VIX and RVX fear gauges. We can see that Implied volatility for the S&P 500 index (VIX) is slightly elevated, but it's back below the 200 day EMA telling us that the SPX will most likely trade sideways to lower over the next week. Volatility for the Russell 2000 index (RVX) is near its 12 month low pointing to the small caps trading choppy to higher over the next week.

Seasonality: Over the last 20, 50 and 100 years equities have been essentially flat in June. Chart below courtesy of Bespoke Investment Group.

Where is the US market in the current super cycle?: The chart below tells us if the US economy and stock market are in a long-term bull or bear market - sometimes called a super cycle. This system does a good job of getting us "long" in the market and keeping us long in the market during a super cycle bull market. Conversely, it does a good job of getting us into cash and/or into bearish trades, and keeping us out and/or in bearish trades during a super cycle bear market. We use the NASDAQ Composite because it's a good proxy for the entire US equities market. We use the weekly chart along with the 17/43 week exponential moving averages (EMA) and the 75 week EMA. When the 17 week EMA (blue line) is above the 43 week EMA (thin black line) the US economy is most likely expanding and the stock market is trending UP. During pullbacks, while in a super cycle bull market, as long as the 17 EMA doesn't cross below the 43 EMA, and as long as the COMPQ index doesn't carve down too far below the 75 week EMA, the UP trend will remain intact and we should stay long the market. Alternatively, once the 17 week EMA crosses below the 43 week EMA, the US economy is most likely contracting and/or is ready to contract and it's a good time to start moving out of long positions and to increase your allocation to cash or to longer term bearish strategies. Note how the 17/43 EMA got us long in March 1995 and kept us long in the super cycle bull market through Sep 2000; it got us out in Sep 2000 and kept us out (or short) through May 2003; it got us long May 2003 and kept us long in the super cycle bull market through Jan 2008; it got us out Jan 2008 and kept us out (or short) through Jul 2009; it got us back in Jul 2009 and kept us long until Sep 2011; and it told us to go long Dec 2012 and stay long until the present. Since we focus on a sideways, non-directional strategy we can make money in both bull and bear super cycles, but we need to be very careful during the transitional periods.

What we see today from the 17/43 EMA on the COMPQ: (Note that there has been no change to this text or charts below since May 22nd; these are very slow moving charts and we update them every 3 to 4 weeks) The 17 week EMA is above the 43 week EMA telling us that US equities remain in a long-term, confirmed UP trend. Nothing will go UP in a straight line so periodic 2% to 5% pull-backs and periods of choppy, sideways trading are expected.

Performance of the credit markets, known as the "smart money", which usually has a good track record of predicting the future direction of the stock market:

Below is the TNX showing the yield on the 10 year T-Note. In the last two weeks a lot of cash has flowed out of 10 year bond pushing the interest rate higher. Currently the yield on the 10 year Note is at 2.39%. Per a long-term technical indicator, the 2nd chart shows that the 22 week EMA is below the 45 week EMA, telling us that the yield on the 10 year T-note is still in a confirmed long-term down trend.

Below is the TLT, an ETF that represents a blend of longer dated treasuries. This chart shows that cash has been moving out of bonds since mid-April, pushing up interest rates. A lot of this cash will most likely flow into US equities.

Below is the UUP that tracks the relative performance of the US dollar to a basket of currencies. We can see that it was very strong since July 2014, but it has paused in the last 90 days and currently forming a wedge. In general, a strong dollar is a positive for US equities, as long as it doesn't get too strong. On the negative, a strong dollar impacts multi-national companies because 30% of their revenue typically comes from outside the US, and a strong dollar makes their goods more expensive and less competitive.

Below is a chart of the BofA Merrill Lynch US High Yield Spread representing the interest rate spread between US treasuries and high yield corporate bonds (aka junk bonds). This interest rate spread tends to offer prescient insight into the future direction of equities. (Both charts shown below are the same; the 2nd chart goes back 1996) For example, leading up to the Aug '11 crash, this interest rate spread started to trend higher in May '11. Prior to the Oct '08 crash, this indicator started to climb in Aug '07. Looking back to 2013 and early 2014, it trended lower for 28 months telling us that corporate debt markets were feeling that the health of US corporations was improving. Then in mid-2014, it moved higher for 6 months sending a "risk-off" signal due to the crash in oil prices. A lot of corporate debt was issued by US oil/energy companies over the last 5 years and there was fear that many of the small to medium sized oil companies would default on their debt. Presently, this spread has been stable over the last 12 weeks telling us that fear has been subsiding.

Below is a chart of total commercial and industrial loans, as of May 22, 2015, that are underwritten and issued by commercial banks. When loan growth is positive, it tells us that businesses are growing and this bodes well for the US economy. Overall, loan growth looks healthy and this supports an expanding US economy.

Below is a chart of the iShares high yield corporate bond ETF, HYG. High yield corporate bonds are a proxy for investor appetite for risk. We can see that investor appetite for risk had been declining since July 2014. It then has moved back above/near the 50 day EMA since Jan 2015. In general, when high yield bonds send a 'risk-off" signal (i.e. HYG declines) this will eventually weigh on equities. As mentioned above, most of this weakness was due to falling oil prices and concerns about how low oil prices could impact US oil & energy companies. About 20% of high-yield corporate debt (approx. $400 billion) was issued by US oil/energy companies over the last 4 years and some of this debt could be defaulted. Currently, HYG pulled back over the last two weeks due to an increased probability that the Fed will increase the Fed funds rate this year. Because the interest rate on the risk-free 10 year T-note has moved higher, the interest rate on riskier corporate debt will need to be repriced and also increase.

Below is a chart of the Powershares DBC ETF that tracks a basket of commodities. This index crashed in the last half of 2014, and the 50% drop in oil represented a large % of the pullback. Additionally, the rally in the US dollar had negatively impacted the prices of commodities because most commodities are US dollar denominated. The DBC most likely has formed a double bottom and is beginning to take out higher lows.

Performance of world markets, which ultimately affect US markets:

Below is the Ishares MSCI Europe Financials ETF (EUFN) - This index is back above the 50 day EMA sending a positive signal about the Eurozone. Since January it has been trending higher due to the European Central Bank (ECB) implementing a round of quantitative easing. Recently it has pulled back because of fear around Greece.

Below is the Ishares MSCI European Union ETF (EZU) that holds approx. 300 stocks in myriad industries, across 10 EU countries. This index is below the 50 day EMA but still above the 200 day SMA, sending a neutral signal. Since January it has been trending higher due to the European Central Bank (ECB) implementing a round of quantitative easing. Recently it has pulled back because of uncertainty around Greece.

Below is the EEM, an ETF that represents large companies within emerging markets around the globe. This index is back below the 200 day EMA. Most likely this will be a temporary pause and it will probably take out a higher low; cash is starting to flow back into emerging markets.

Below is EWI that represents a basket of Italian companies. This index is above the 50 day EMA, which is constructive for the Eurozone.

Below is EWA, an ETF that tracks a basket of Australian companies. This index is back below the 50 day EMA. Australia is a large commodity exporter of iron & aluminum ores, copper and coal, so its stock market is a barometer for global growth. Because commodities have been depressed this has pulled down Australia's stock market.

Below is EWG, an ETF that tracks a basket of German stocks. This index is back below the 50 day EMA, but it's still above the 200 day SMA. Most likely this will recover once Greece negotiates its next bailout.

Below is EWQ, an ETF that tracks a basket of French stocks. This index is below the 50 day EMA, but the chart is still constructive for the Eurozone.

Below is EWP, an ETF that tracks a basket of Spanish stocks. This index is back below the 50 day. Most likely this will recover once Greece negotiates its next bailout. The Spanish economy has the best growth rate out of the EU countries.

Below is EWU, an ETF that represents a basket of stocks in the United Kingdom. This index is back below the 200 day line. However, because it's still above the upward sloping trend line, it's still constructive for the Eurozone.

Below is the FXI that represents a basket of large-cap Chinese stocks. This ETF is above the 50 day line, which is constructive for Asia and global markets in general.

Below is the EWH that represents a basket of Hong Kong listed stocks. This ETF recently rallied, which is constructive for Asia.

Below is the EWJ that represents a basket of Japanese stocks. This ETF is above the 50 day EMA, which is constructive for Asia.

Below is the EWY that represents a basket of South Korean stocks. This ETF is back below the 200 day SMA.

Below is the EWT that represents a basket of Taiwanese stocks. This ETF is back below its 200 day line.

Below is the INP that represents a basket of large companies in India. This ETF is below the 50 day EMA, which is a negative for Asia.

Performance of certain US sectors, which provides insight into the future direction of US markets (i.e. sector rotation analysis):

Below is the daily chart for the XLF that represents 81 US financial companies. This ETF is above the 50 day EMA and above the Dec high. Investors are betting that interest rates will be higher in the next 4 to 6 months, which will usually boost bank earnings.

Below is the daily chart for the XLI that represents 62 industrial companies. This ETF is below the 50 day EMA and looks bearish.

Below is the daily chart for the XLY, which represents 80 companies that are classified as consumer discretionary, or "risk-on" types of companies. This sector continues to demonstrate strength because the drop in gasoline prices will supposedly put more cash into consumer's pockets. With this said, the Chaikin Money Flow is bearish, so it's demonstrating negative divergence.

Below is the daily chart for the XLP, which represents 40 "risk-off", high-dividend-yield, consumer staples companies. Investors who believe that the US market is getting too expensive will move cash into these "safer" companies. However, many of these large-cap companies are interest-rate and dollar sensitive. Therefore, with the recent spike in interest rates and the dollar, investors have been moving toward the exit.

Below is the daily chart for the XLV, comprising 55 healthcare companies. This index is near its highs telling us that the healthcare sector continues to out perform.

Below is the daily chart for the XRT that represents 95 retailers. This ETF closed back above the 50 day EMA and the indicators recently improved. Consumer spending drives 2/3rds of the US economy, so it's important to monitor the health of retailers.

Transports, viewed as a leading indicator, is still weak. In general, the poor trading behavior of this ETF has been a negative for the broad stock market since late March. Transports (truck, rail, air) are an important leading indicator for the general health of the US economy.

Below is the daily chart for the XLE, which represents 41 energy/oil companies. We most likely have put in place a double bottom and are now taking out higher lows, which is a positive for energy related stocks.

Semiconductor Stocks, viewed as a leading indicator for economic growth, is above the 50 day EMA, which is constructive for equities.

Equal Weighted Technology Stocks, viewed as a leading indicator, is over the 50 day EMA, but the indicators are mixed.

Broad-market breadth indicators that provide insight into the general strength of the market - also called the "internals" of the market.

Percent of S&P 500 Stocks Above Their Respective 50 day SMA - When a stock is above its 50 day SMA it's classified as "healthy". Currently 42% of the S&P 500 stocks are above the 50 day SMA. This breadth chart along with the indicators tell us that the big-cap stocks will most likely trade choppy to lower over the next week.

Percent of S&P 500 Stocks Above their Respective 200 day SMA - When a stock is above its 200 day SMA it's classified as "healthy", and right now 59% of the S&P 500 stocks are above the 200 day SMA. This breadth chart along with the indicators tell us that big-cap stocks will most likely trade choppy to lower over the next week.

Percent of NASDAQ Composite Stocks Above their Respective 50 day SMA - When a stock is above its 50 day SMA it's classified as "healthy". Currently 54% of the NASDAQ Composite stocks are above the 50 day SMA. This breadth chart along with the indicators tell us that equities will most likely trade sideways over the next week.

Cumulative Advance Decline Line on the NASDAQ Composite - The cumulative number of advancing stocks less the number of declining stocks provides broad insight into the strength of a developing trend or prevailing trend, and provides insightful prediction into the timing of a trend reversal. This indicator is classified as a broad-market breadth indicator. We monitor the blue 8 day EMA for short-term clues and the red 22 day EMA for intermediate-term clues; a positive slope is bullish and a negative slope is bearish. We monitor the blue MACD histogram for short-term clues and look for the red MACD line crossing above or below the zero line for intermediate-term clues.

Conclusion from the Cumulative A/D Line on the NASDAQ Composite: Equities will most likely trade sideways and choppy over the next week.

Percent of NASDAQ 100 Stocks Above Their Respective 50 day SMA - When a stock is above its 50 day SMA it's classified as "healthy". Currently 42% of the NASDAQ 100 stocks are above their 50 day SMA. This breadth chart along with the indicators tell us that big-cap tech stocks will most likely trade choppy to lower over the next week.

The NASDAQ Composite McClellan Oscillator is above zero, telling us that stocks will most likely trade sideways and choppy over the next week.

Below is the economic calendar for the next 1 week:

Week of June 15th: This takes us to the end of the June options cycle. The economic releases and events that are closely followed this week are the following: Industrial Production on Mon the 15th; Housing Starts on Tue and 16th; conclusion of the June FOMC meeting and a decision if they are going to raise interest rates on Wed the 17th; Philly Fed ISM on Thur the 18th.

We recommend the following trades as of June 14, 2015:

We are down to the last week for our June trades and our spreads are 2.7% or greater out of the money. We are usually done collecting premium in the last week, but we'll continue to show our recommended trades. However, unless we get a large move in the markets, the trades shown below will most likely not fill within our recommended price ranges.

Our goal is to hold our trades through the end of this week and let them expire worthless for the buyers, where they'll be 100% profitable for us, the sellers. If anything changes where we might need to take action on one or more of our spreads, we'll notify everyone via email.

It's recommended to use 10% to 15% of your cash in total each day when one or more recommended spreads are filling within our recommended price ranges. For more on how much cash to use in a single day please visit the FAQ page and read entry #45. For more on the psychology of "collecting premium" with credit spreads please go here.

RUT Bear Call Credit Spread
BTO RUT '15Jun19 1310 call
STO RUT '15Jun19 1300 call
- For a credit of 45 to 60 cents. It will take a strong UP day for this spread to fill for a credit of at least 45 cents. If this spread starts to fill for more than 60 cents credit, suspend any further fills on it and click-UP a strike to keep your credit between 45 and 60 cents. We will hold onto all existing spreads if we're forced to click UP and "layer" different strike prices.

RUT Bull Put Credit Spread
STO RUT '15Jun19 1190 put
BTO RUT '15Jun19 1180 put
- For a credit of 45 to 70 cents. It will take a strong DOWN day for this spread to fill for a credit of at least 45 cents. If this spread starts to fill for more than 70 cents credit, suspend any further fills on it and click-DOWN a strike to keep your credit between 45 and 70 cents. We will hold onto all existing spreads if we're forced to click DOWN and "layer" different strike prices.

SPX Bear Call Credit Spread
BTO SPX '15Jun19 2180 call
STO SPX '15Jun19 2170 call
- For a credit of 45 to 60 cents. If this spread starts to fill for more than 60 cents credit, suspend any further fills on it and click-UP a strike to keep your credit between 45 and 60 cents. We will hold onto all existing spreads if we're forced to click UP and "layer" different strike prices.

SPX Bull Put Credit Spread
STO SPX '15Jun19 2000 put
BTO SPX '15Jun19 1990 put
- For a credit of 45 to 70 cents. It will take a strong DOWN day for this spread to fill for a credit of at least 45 cents. If this spread starts to fill for more than 70 cents credit, suspend any further fills on it and click-DOWN a strike to keep your credit between 45 and 70 cents. We will hold onto all existing spreads if we're forced to click DOWN and "layer" different strike prices.

NDX Bear Call Credit Spread
No recommended trade for the June cycle

NDX Bull Put Credit Spread
No recommended trade for the June cycle


For the Autotraders:

If you're an auto-trade subscriber using either Iron Condor 1 or Iron Condor 2 services, no action is required. We currently have 3 iron condors - 1 RUT and 2 SPX.

Autotrade Open Positions:

To view a summary of the open, June, autotrade trades please go to the following link: Auto-Trade Active Positions. To view the trades please login with your Login ID and Password, and click on “Auto Trade Active Positions''.

For information on how to read your brokerage statement, gauge the value of your account, and how to distinguish between "cash balance", "account balance" and "net liquidating value", please go here.

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