2/9 Morningline

The action this morning is in stocks.

Bear signals flashed Jan. 21 on the macd continued as blue chip stocks (SPY) moved to the top of yesterday's trading range. The 20-day moving average moved deeper below the 50-day, an inverse pattern shouting "Bear!" to knowledgeable traders. The money flow index stayed in oversold territory, below the 20-line.

However, the VIX declined 4.8% open to current, an indicator of increasing confidence among traders. The "fear index" remains in a range where it has traded often since Jan. 22, so there isn't any decisive break to the downside.

Treasury long bonds (TLT) and high-yield corporate debt (JNK) were unmoved, pretty much, from yesterday. Gold (GLD), oil (USO) and emerging markets gapped upward slightly. The dollar moved to the top of its three-day range against the euro. The yen stayed in-range against the dollar (USD/JPY). Among holdings, ERTS gapped down by 9% after earnings were released. My position in a February iron condor. The zone of maximum profit at expiration runs from $16 to $18.

So the new price puts me below the max but still profitable when the options expire after the end of trading Feb. 19. My strategy will be to stay in the position for now but to jump at the first sign of further erosion.

ERTS is now trading at support set Dec. 9 and within congestion at the starting point of a large rise beginning in early March.

Let's run the numbers:

Indicators, at about 10:00 a.m. Eastern:

• Blue chip stocks etf (SPY) is trading at $106.98, entered macd bear mode at close on Jan. 21 (at $111.70)
• Fear index or volatility (VIX) 25.60, bull (bearish for stocks), Jan.21 (22.27)
• Treasury long bonds (TLT) $91.87, bear, Jan. 12 ($90.32)
• Corporate junk bonds (JNK) $37.73, bear, Jan. 20 ($39.63) 
• Emerging markets (EEM) $37.73, bear, Jan. 20 ($41.77)
• Gold (GLD) $105.14, bear, Feb. 4 ($104.37)
• Oil (USO) $35.64, bear, Feb. 15, ($38.40)

Forex currency pairs:

• Dollars per euro (EUR/USD) $1.3749, bear, Jan. 20 ($1.4106)
• Yen per dollar (USD/JPY) ¥89.30, bear, Jan. 12 (90.97)

Stock options holdings, February expiry:

• CVS, iron condor (p29/-p31/-c34/c36) $32.67, bear, Jan. 21 ($33.24)
  
• ERTS, iron condor (p15/-p16/-c18/c19)  $16.01, bull, Feb. 4 ($16.98)
• MCO, covered call (-c30) $26.83, bear, Feb. 4 (26.39)
• PALM, covered call (s/-c13)  $9.79, bear, Jan. 26 ($11.17)

Stock option holdings, March expiry:

• CSCO, iron condor (p22/-p23/-c25/c26), bull, Feb. 8 (23.50)

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