Thursday 2nd of September

The final performance data shows a +7.89% on the futures program for August, which was a new record monthly gain, very nice.
Another up day in the S&P futures, closing up 8.25 points or 0.76% on the day. The price action was mostly just drifting higher with some smaller retracements. After the test lower at the open held 1079, it was basically trading to the upside for the rest of the day, with an extra push higher towards the close to barely break the 1090 level, making a high at 1090.50 on the day. Weekly claims was a bit better than expected coming out at 472k and Pending Homes Sales came out +0.4% vs. the -1.2% expected. As I mentioned a few days back I thought the after the 1037 level held for the 3rd time we should get a move towards the upper end of the 1037 to 1098.50 recent range. We are basically in the upper end of this range now. I see key resistance levels being: 1098.50 (last reaction high), 1104 (falling resistance from the 2010 high), and 1126.75 (August high). The big level for a break out higher is 1126.75.
The expectations for tomorrow's NFP report is -101K and ISM non-manufacturing PMI is 53.6.
As we saw with ISM on Wednesday, it is not only the NFP report that can move the market aggressively, so tomorrow we have 2 big event risks. I personally think the market had priced in a weak number at the start of the week, but the focus has been more for a possible better number and also the expectations for more QE at the next FED meeting fueling the drive higher.
We have once again seen decent swings over the last week. Opened the ES on Monday at 1060, down to 1037 and back up to 1090 today. Trading wise these swings forced me to make some adjustments on the portfolio. On the futures side I made 8 points on the day trading long only to hedge my short calls, which was ok, given that it closed up 8.25 points. However since I had calls from 1070, 1080, 1090 and 1100 the gain on the futures was not enough to offset the loss on the futures, so ended the day more or less flat in valuation terms. To balance the risk going into the NFP report I made several adjustements on the options. First of all I bot back the 1070 and 1080 Sep calls losing 34.50 points all inn. I bot back the short puts 1070 and 1080 for expiration tomorrow making 6 points. I also bot back the 1040 and some 1050 puts to reduce the exposure in case we sell off big, make 26 points on those puts.
Then I certainly don't want to leave some cheap puts open to make the last few points out of them. No, I rather take profit and issue new puts that is much close to the market paying a higher premium and then have more room to sell the 1050 and 1040 puts again if we go lower. It is all about having an escape route and possiblity to add more in case it moves directional and don't have to defend against positions that was almost worthless some days ago. Ok this is what I did. I sold 1120 calls for October 15th, added a very small 1040 short puts position for October 15, remember I now have 1030 and 1040 short puts for October. 1040 is the key support level, so makes sense to sell some there, of course will hedge short with futures if we get down there. I have 1.4 as much call exposure as puts at the moment. I sold 1090, 1070 put and 1060 puts for September 17th to balance the delta a bit more. The mass of the positions are now located from 1090 and to 1100. So might have to make several adjustments if we spike higher and start going up and down that range. Have above 8 points per day in premium for the September options and 3.6 per day on the October options. Delta is -12 on the positions at the moment, meaning I am slightly short in real terms. I would like to add if 1065 break tomorrow I think it will head to break 1037, however if 1098.50 breaks I favor a run towards 1130 and possibly higher near term. Big day tomorrow, good luck.