Last week the futures of S&P500 moved in a range after rebounding from the 50-day MA but failed to overcome the level of May’s max volume cluster around 1344. In general, the growth of trading volume during the days when the index declined prompts growing bearish sentiments. If there is another downswing, then the 50-day MA (1322), the local low at 1316 and the option barrier 1290.25 will become the closest support levels. If the downward correction is over and the mid-term uptrend is resumed, the closest resistance levels will be located at 1350 and 1400 (option barriers), and the local highs 1358.25 and 1373.5.
The weekly movement range of the futures was slightly narrow – 29.5pts. The daily volatility level was low as well. Friday was the day of the highest volatility (17pts) while on Thursday the volatility level was the lowest (11pts). However, the expected volatility of the futures fluctuated in a wider range because of the market concerns over the possible default of the USA. The VIX indicator showed 19.09 on Monday and 15.5on Thursday. On Friday it was 17.43.
This week’s economic calendar:
The volatility of the S&P500 futures may surge on the following news:
New Home Sales
Durable Goods Orders
Prelim GDP
Unemployment Claims
The main trading tactics of option trading are the same: buying volatility when the VIX value is down before significant news releases and taking profit when the expected volatility level is up right before the news releases or right after them when the actual volatility is up. It should be noted that May 30th is a day-off in the US. That is why it would be wise to close all the long trades until Friday.
Provided by the Department of Options,
