SPY from 135 handle to 131 in a heartbeat

Starting from June 28, overbought situation in SPY as "described" by new Option Wizard® Simplified Options Strategy (SOS) Backtester.

The "red lights" were "on":

94	22	286	Tue-28-Jun-11	129.61
96	41	314	Wed-29-Jun-11	130.72
96	66	352	Thu-30-Jun-11	131.97
98	90	432	Fri-1-Jul-11	133.92
95	97	479	Tue-5-Jul-11	133.81
96	97	481	Wed-6-Jul-11	133.97
93	97	478	Thu-7-Jul-11	135.36
67	93	449	Fri-8-Jul-11	134.4
8	81	359	Mon-11-Jul-11	131.97

Backtesting Options Strategies

Our feature appears in July issue, TECHNICAL ANALYSIS OF STOCKS AND COMMODITIES. Page 38-41. Available at newsstands or traders.com.

When men weep and gnash their teeth: The Next Financial Crisis Will Be Hellish And It’s On Its Way

According to author Addison Wiggin, we haven't solved a thing (or learned a thing).

e.g. 51:1 leverage at the Fed. A 2% move wipes out our Central Bank.

Forbes via 321gold.com. Invite you to read and ponder......

Feature slated: "Sample Variance" for options backtesting

Our feature "Sample Variance" will appear in the July 2011 issue of Technical Analysis of Stocks and Commodities. It covers how to use this approach to quickly and easily backtest options strategies, as does our newest product, Option Wizard® Simplified Options Strategy (SOS) Backtester.

Option Wizard® Simplified Options Strategy (SOS) Backtester shows that despite earthquakes, tsunami's and nuclear catastrophes, probabilities prevail

On Wed. March 16, 2011, we used the new Option Wizard® Simplified Options Strategy (SOS) Backtester to determine some expiration probabilities for SPY.

Previous close: SPY 128.56 Tues Mar 15, 2011

THE PROBABILITIES FOR SPY CLOSE 2 DAYS LATER:

136	0.79%
134	1.97%
132	6.71%
130	22.11%
128	54.64%
126	11.69%
124	4.11%
122	1.66%
120	0.95%
118	0.63%

So where did it close, Friday, March 18, 2011 -- options expiration?

127.76

Very near our highest probability 128, which Option Wizard® put at 54% probability. Doesn't mean SPY couldn't have closed at 136 or 118, it could have. Theoretically. But where should we put our confidence? Where should we place our positions.

Btw, I mentioned this exercise to a colleague as I was doing it. He is a financial engineer, Chicago firm, fan of fat tails, black swans, and N. Taleb. He scoffed. I understood, he had/has a point.

Still, even in a week (a prior month) of

• Big moves, bull & bear
• Aftermath: Earthquake, 5th worst
• Aftermath: Tsunami
• Ongoing and raging and worsening nuclear catastrophe

It is perhaps nothing short of amazing that plain, vanilla probabilities --prevailed.

OWTM Gold signal update -- still climbing....

1429.50	3/4/11
1408.60	2/25/11
1389.10	2/18/11
1355.90	2/11/11
1348.90	2/4/11
1337.90	1/28/11
1341.90	1/21/11

Signal update: gold (good), SPX (too early)

Since our Jan. 21, 2011 call, looking for a near-term bottom in gold, and based on our program Option Wizard® Trading Method Gold, after a rather slight $4 more to the downside, we have been some $48 to the good on gold:

1389.10	2/18/11
1355.90	2/11/11
1348.90	2/4/11
1337.90	1/28/11
1341.90	1/21/11

On Jan. 7, 2011 we posed the question: is the SPX running out of steam?

7-Jan-11

1,271.50

-2.35

-0.18%

Now we have our answer: no...at least, not yet. (1343.01, close, Friday, February 18, 2011.) And the way things are going, we could as easily pose the question, will the market ever go down again? We think we know the answer to that one: a) eventually and b) when you least expect it and c) when everyone is "all in." Again, stay tuned. We will be.