Daily recap Thursday 26 Aug

The S&P started out higher and came within a four points to close the 1064.50 gap from Monday. Had been looking for rally following the solid reversal off that 1037 yesterday morning. That reversal bar had 105K contracts traded on 5min bar, which is some solid volume, especially this time of the year. Then the next bar closed up it became clear to me that somebody was buying the market strongly. Think about the logic. There is no way the market could close way off the lows on a price bar and then contiune up the next bar after a steep drop unless the demand greatly overcome the supply, pushing the price back up. I like to keep track a bit on the volume of the reversal bars, it tends to be in the same regions volume wise often, so it gives you a bit of a clue how much volume on a  5min bar it takes to get a bounce. Tend to see the biggest volume bars on the tops and bottoms on the charts. Have been playing this 1040 to 1130 range for time and follwing the sell off Thursday last week I sold calls as I expected it to go lower towards the lower point of the recent 1040 to 1130 range. Meaning I sold S&P futures calls receiveing a premium that gives me a "stack of chips" so to say, to trade long to hedge these outstanding calls. As we dropped lower throughout this week, I ended up with mostly fairly away out of the money calls, 1090 and higher strikes (with a nice profit) and it made sense to me to add some puts to have a bit more hedge against the calls and get more premium to use for intra day trading. It feels like the most risk at the moment is for a sharp sell off rather than a sharp rise, so the volatility risk on the options pricing is less when I am short calls. Howeve given the quick drop from 1098.50 last week it made sense to take some profits off the table and hedge out with some puts as well. So this morning I was more balanced with calls towards 1070 and up and puts below 1060 and with tomorrow's US GDP coming out it was time to take some risk off the table. I closed most of my open weekly options, which expires tomorrow and moved some into 1090 calls for September and 1070 weekly options expiring next Friday. The weekly claims data came out a bit bettern than expected and caused a spike higher above 1060, but quickly people realized the number was not good enough for any extension of the bounce from yesterday. My strategy for today was to drain more time value out of the weeklies towards US lunch time and then cut back on the exposure. This worked out well and now we just have to sit tight and wait for the release of the US GDP data tomorrow for any major adjustments to be made. Looks like every trader on the planet is looking for a horrible GDP data, so I think bad is pretty much priced in already. Could see a rally if the data is more or less inline with expectations. A very weak number will send S&P below 1036 most likely. Break of 1036 could see things get real ugly quick, so be careful tomorrow. Best of luck