SPY/SPX Iron Condor

Disclaimer: this is not financial advice, more like me talking out loud about what I am seeing and planning to do.




Short-term pullback with some ranging action on the SP500.
What predominantly fuels my idea is using Linear Regression and Standard Deviation. As many would know, both are very critical topics in statistics which also affects financial markets. Fat tails/long tails exist quite often in the stock market but on something as massive as the SP500, I think the majority of large investors and institutions will not gamble beyond 2.0 stdevs. We are in major overbought territory for the short-term. I am not basing this off of something fickle like a 20SMA but rather 10 years of data showing the market responding to these Linreg and Stdevs.

Descriptions of the visuals I have in my chart-

• The black lines (solid and dotted) are all from a Linear Regression that dates back to March 2009 (shown in 2nd, zoomed out chart).
  
• The top, dotted line is at 2.7 standard deviations from the regression. I chose this number because it's best-fitted to where we had the January 2018 pullback. This is where I think we will find resistance.
  
• The lower, dotted line is 1.0 stdevs. This is a nice, rounded number that the market likes to straddle. This is where we will indeed straddle for a few months. It will alternate being a line of support and a resistance.
  
• The lowest of the 3 black lines, solid line, is the Linear Regression. If we are indeed still in a bull run, this is a sweet spot to buy when others are freaking out. Since 2018 it has shown to be the dominant line of either support or resistance.
  
• I have two lines additional lines which are either red or green and they denote other trend lines that have previously been a resistance, turned to a support, and I think will soon become a resistance again. These also match up to be about the 2.0 stdevs from Linear Regression.
  
• The bar pattern in red is cloned from the Jan 2018 pullback. It matches up to the trend lines quite well.
  

Me personally I am buying an Iron Condor expiring in April of 2020. My plan is to actively manage it, meaning I am looking at Buying to Close (BTC) some of the Calls and Puts at the green and red rectangle areas. This reduces some of the profits that I would receive at expiration if everything plays out perfectly but also reduces the risk. For example, if we get to the 2nd green rectangle and things go very south, it would be wise to have closed some of those short-side puts at the red rectangle, limiting that risk.

Additional charts/resources that influence me are:

• INDEX:S5TH - the % of SP500 stocks above their 200SMA, an indication of overbought/oversold
  
• VIX, TLT (Bonds), and Gold are all rising/breaking out. Each of these tend to run opposite of equities.
  
• Fisher Transform, Stochastics, RSI all were in overbought territory and are falling.
  
• Many Fear/Greed Indexes have been at Extreme Greed as of late, which is a great contrarian signal.