Daily Market Newsletter
April 2, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
April Expiration
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Market Commentary
What odd times these are, when recession signs flash left and right yet prices charge higher. It’s happening again; markets are climbing the wall of worry. The stock market has become so much less of a open market where true “value” can be discovered based on projected forward earnings, and so much more about “where can I park my cash to get some yield?” Everything has become so distorted by the supposedly “heroic” application of QE by Bernanke that there is almost no linear logic that one can apply to markets.
I’m hearing people say that “it’s different this time” with respect to the yield curve. That certainly wasn’t the case in the fall of 2018 as the yield curve started to invert. I should be thankful that we’re not crashing, but it appears that the only thing holding the suspenders up are the whisper numbers of good 1Q earnings. We’ll find out next week starting with the banks.
Trading conditions have been difficult to determine; our long call spreads have been spotty, the long condors have made moves in both directions but not enough to fire our orders, and the short condor spreads are under attack nearly as soon as we place the trade. The only strategy that appears to be working month in and out are the short puts.
I will be out of the country and not producing the report from Monday May 20th until Thursday June 6th; in my stead will be a very talented guy by the name of Alex who I will have do some guest videos in the near future so that you get used to his voice and style.
Please sign up for our free daily crypto report here.
Offensive Actions
Offensive Actions for the next trading day:
- Watch for a fade on the upper EM tomorrow, using 03APR SPY puts one strike ITM.
Defensive Actions
Defensive actions for the next trading day:
- Any vertical, butterfly, or diagonal debit spreads that we set up are risk-managed from day one, and no defense is really required.
- Closing orders have been entered for all new spreads.
Strategy Summary Graphs
Each graph below represents a summary of the current performance of a strategy category. For an explanation of what the graphs mean, watch this video.
Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
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Technical Analysis Section
Market Internals: Volume was below-average today and breadth ended the day mixed with -32 advancers minus decliners.
SPX Market Timer : The Intermediate line rose into the Upper Reversal Zone, now showing a bullish bias. This chart is showing a strong bearish cluster with the two strongest timeframes overbought.
DOW Theory: The SPX is in a long term uptrend, an intermediate uptrend, and a short-term uptrend. The RUT is in a long-term uptrend, an intermediate downtrend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX fell to 13.36 after peaking at 50.3 a year ago, inside the bollinger bands. The RVX fell to 17.51 and is inside the bollinger bands.
Fibonacci Retracements: The price has moved through several important Fib levels and is not caring about any confluence levels that these present. The recent retracement did not even get to the 23.6% fib retracement. We’ll see if fibs start to matter again.
Support/Resistance: For the SPX, support is at 2700 … with overhead resistance at 2941. The RUT has support at RUT 1500 with overhead resistance at 1600 and 1742. The S&P500, Russell 2000, and Nasdaq 100 have all printed a Death Cross with the 50ma crossing below the 200ma; this can be a leading signal for a true Bearish move. It can also signal “false” and create a massive swing higher. We might be seeing the latter scenario as the Dow has now printed a Golden Cross, to be followed by the SPX any day.
Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 55, yet is starting to reflect the reversion to the larger uptrend again. The Weekly chart has an energy reading of 30, in exhaustion from the uptrend. The Daily chart is showing a level of 56 which is now fully recharged. These readings say that we should expect at least a couple of weeks of choppy price behavior but will see sharp moves during this chop due to the charged nature of the daily chart.
Other Technicals: The SPX Stochastics indicator fell to 60, mid-scale. The RUT Stochastics indicator flattened at 51, mid-scale. SPX MACD histogram rose above the signal line, showing a return of upside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2746 and resistance at the upper band at 2877 with price is below the upper band. The RUT is back inside the Bollinger Bands with its boundaries at 1508 to 1574 and price is below the upper band. The price is starting to release after the recent Bollinger Band squeeze.
Position Management – NonDirectional Trades
I have the following positions in play:
- SPY 12APR Long Straddle entered (4/1) for $4.68 debit.I will immediately look for a 40% return on the entire position and will not look to leg in nor leg out. This trade really favors a downside move as it’s a long-vega trade. Max risk on this trade is limited to what we pay for it but we want to avoid letting this one circle the drain.
No additional positions to add at this time.
I have the following positions in play:
- SPX 2725/2730*2860/2865 Iron Condor (3/25) entered for $2.60 credit. My goal is to remove this trade for a 25% return on risk. This would be a closing debit of $2.00 or less.
No additional trades at this time.
I have no current positions:
Calendar spreads are good for markets in quiet/trending character, but not sideways/volatile which might be coming next. If the market reverts back to quiet/trending, then I’ll look to continue this method.
The calendar spread tracking sheet is available for your download here. Yes, if you follow the math in the sheet, all of the numbers account for commissions in and out of the trade. Please note: If you trade these positions please keep the size small, to the point where you “do not care” about the success or failure of this position.
I have the following positions in play:
- SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level. I currently have the SLV 18APR $15.5 calls (2/11) for a $.17 credit. I will let these expire.
- EBAY 26APR $34 puts (3/11) sold for $.73 credit. I will look to remove this trade for a $.10 debit.
- PFE 17MAY $39 puts (3/18) sold for $.39 credit. I will look for a $.10 debit to remove.
No additional trades at this time.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking for the next signal.
- RSI(2) CounterTrend – None at this time.
- Daily S&P Advancers – Looking for the next signal to go long when we have single-digit advancers on the ADSPD.
- Swing – I placed a SPY 17APR 282/283 debit put spread (3/29) for $.42 debit, and will look for a 50% return from this trade. This is counter-trend but looking for a quick move lower.
Crypto has had relative strength over the last few weeks and no one believes this rally.
Investors should currently be looking to find technical entries to warehouse BTC/ETH/LTC assets for eventual trades on Alt-coins. You should also be looking to devices like “trezor” or other cold-storage devices to keep your assets off of the network, or other secure wallet such as Navcoin. Relying on the security of your broker is no longer good enough; no one can log into your ETrade account and “steal” your stock assets, but the whole nature of Cryptocurrencies and their portability means that someone can grab your assets and transfer them elsewhere. I will continue to discuss the tradingview platform in daily videos as I think that it is currently the best way to chart the “big three.”
From Friday’s close at SPY 282.48, there is a +/-3.79 EM into this coming Friday; this is significantly smaller than last week’s 5.268 EM and is more in-line with the norms. The EM targets for this Friday’s close are 286.27 to the upside, and 278.69 to the downside.
THis might yet be a week that we can fade the upper EM marker for the week; see how the price reacts if it hits the SPY 286.27 level.
I will start playing directional bear spreads once we see upside exhaustion on more than one timeframe.
The scan that I discussed in the 8/4/2018 video is available to download for thinkorswim here: http://tos.mx/OvdVnz I will also be adding a second Larry Connors scan to this section as well; here is the Connors Crash scan: http://tos.mx/BhHuKL
I have no positions in play at this time.
We are getting close to earnings season and this will be a series of land mines that we’ll have to avoid if we’re to get back into longs again.
The “Hindenburg Strategy” is meant to capture “value” from successive corrections that lead up to the final “death spiral” with a Bear Market. The basic principle is to buy 3-month out long puts on the SPY, and to finance those puts by the sale of credit spreads.
I have no positions at this time. I cleared out the most recent set of puts on the drop to the 200ma back in October. I will “reload” again soon, if/when the weekly chart goes into upside exhaustion. The three-month puts are coming down in price closer to what I’d prefer to pay. (3 months out/90% of current value)