This strategy prepares you for a surprise in either direction

The SPX (SPX | Quote | Chart | News | PowerRating) daily volatility has been about 0.7% - 0.8% for the past four weeks, and yesterday, the daily range was only 3.4 points, taking SPX traders out of the game for the day in the major indices. The SPX finished off less than a point to 1240.56 (-0.07%), while the Dow was +4 points to 10,683 (+0.04%), the (QQQQ | Quote | Chart | News | PowerRating) and Nasdaq (COMPQ | Quote | Chart | News | PowerRating) were each +0.3% to 39.73 and 2183. NYSE volume was in line with the current 10-day average at 1.43 billion shares, while the volume ratio, 48, and breadth, -208, were neutral, telling us nothing. The energy sector declined from obviously extended levels as the (OIH | Quote | Chart | News | PowerRating) was -2.7% vs. last week's total gain of +2.7%. Crude oil was -0.3%. The (SMH | Quote | Chart | News | PowerRating) was -0.4% coming off a +2.9% week, while the RTH, which was last week's leader at +3.4%, tacked on +0.9% yesterday, led by (KSS | Quote | Chart | News | PowerRating), +2.1%, (TGT | Quote | Chart | News | PowerRating), +1.9%, and (LOW | Quote | Chart | News | PowerRating), +1.1%. The (TLT | Quote | Chart | News | PowerRating) was -0.7% and cash gold -0.3%.

The NYSE Composite (NYA) made new rally highs last week above 7581 and closed yesterday at 7637.51, while the Bullish Percentage index ($BPNYA) has declined to 68.73% from about 73% at the 7581 high. The SPX percentage is 70.4% as price pushes the 1245.86 high when the percentage was above 75%. The Nasdaq 100 and Nasdaq Composite continue to be led by fewer stocks with percentages of just 57% and 53%. These percentage numbers are good to keep an eye on week to week, especially if there are any other negative divergences starting to show up in some oscillators. The other side of the spectrum is the 96.7% energy sector and 95.1% utility percentage, which have been obvious market leaders.

This is a key time week with Fibonacci ratio dates from 09/14 - 09/16. There are some more time dates from 09/21 - 09/23. This corner is ready for any surprise, up or down, with long synthetic straddles put on into this rally, but I do expect any significant surprise to be to the downside. By approaching it this way, the market makes a decision, and I can go fishing until it develops to a point where delta neutral adjustments can be made. These are low-implied-volatility positions, which is what you want when you play an impending move with this strategy.

Have a good trading day,

Kevin Haggerty