Today we are applying an Iron Condor on the XJO


The XJO has been tracking sideward for the past couple weeks in a tight range despite strong moves higher in the SP500. The U.S made another fresh all time high last night, but locally we have failed to even get close to our own previous highs. Much of our malaise will be likely due to recent local activity, particularly in the XFJ and XMJ. WBC didn’t have a great report, though NAB will shed further light on the Banks with its report next week. Iron Ore has made fresh lows, which will likely weigh on our miners, though the recent fall in the AUD will help offset the negative sentiment – indeed they finished in the green today despite BHP and RIO closing lower in their overseas trading last night. The RBA yesterday said they wouldn’t defend against short term bonds, though they remain dovish on interest rates for 2022. Finally, its worth noting that the SP500 does look overbought in the short term, and it would be reasonable to expect a short-term pullback with some natural profit taking. They might use this Thursday’s Fed meeting as an excuse.

Technically, the XJO is once again hanging around 7,400. There are resistance and support levels basically every 50 points on the XJO, but the blue lines on the chart below indicate the key levels to keep an eye on. The 50 and 100 day MAs have also converged around 7,400, which can often act as a magnet.

We could expect the XJO to continue its sideward march. To trade this view we can look at an Iron Condor with sold legs a 7,550 and 7,250 for an expiry on the 18th of November. The chart below highlights these two strikes as the pink dotted line. These levels are either at or outside key support and resistance levels: 7,550 is above the key resistance at 7,525, and 7,250 is below the key support at 7,300. 7,250 is also a support level. We can use these levels defensively because if the XJO remains between the two sold legs (7,550; 7,250) by the 18th of November expiry, maximum profit is made. In other words, if the market remains between the pink lines for the next two weeks, maximum profit is obtained.