Monday, January 16th, 2017

Index options trading-SPX butterfly

RUT has broken above its ceiling of 605 and the upper trendline and may go higher soon.

RUT 121509

Due to lack of participation, $SPX  is still stuck under its upper channel and have not been able to justify another run up like RUT did this week. In fact this lack of participation of SPX that is  holding RUT back.  Why this is happening ?

Well for one thing  SPX is at 50% Fibonacci retracements  levels from October 2007 and than some Market Technicians are incorrectly drawing trend lines from October 2007 highs and making it look like it is hitting it. This creates another hurdle. It all depends who draws these trend lines and how they are biased and how they lead their readers to believe what they think.  The correct trend line shown in this chart from left to right, has already been surpassed  before the rectangle formation and consolidation  since November 16 2009 and done with in my opinion. Its now a matter of time buyers stepping in and catching the bid.

SPX 121509

SPX can power itself itself out of here and obliterate this upper line easily. However it has failed on 3 occasions while RUT has blown through it on 12/14/09 and closed above it.

With that said, and the Options expiration week upon us a struggling  SPX trying to break above at 1112 upper trend line we have 2 days left and here is the trade I am going to take…

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