Daily Market Newsletter
April 15, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
April Expiration
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Market Commentary
Stocks got a nice pop to the upside on Friday’s JPM earnings blast, but the rest of the Financials went for the ride on Friday and that left no room for GS and C to go anywhere today. We also have BAC tomorrow, but the first of the “big techs” comes riding into town tomorrow after the bell with NFLX, which can move markets. They have been pulling back the last couple of days and can create a squeeze if they surprise again, especially with headwinds created by the recent DIS news.
Other than that, few catalysts out there in this market other than the approaching Tech Flood coming the middle of next week. This is a good time to have a LP Condor in play while the underlying S&P is in double timeframe exhaustion.
We should be looking for pullbacks to sell puts against assets that we want. We should be looking for momentum breakouts. Nothing else will work in this environment.
Earnings Updates – the following companies of note will be reporting over the next few days:
- Tuesday: BAC, IBM, JNJ, UAL, UNH, NFLX
- Wednesday: MS, PEP, USB
- Thursday: AXP
Here are the big earnings of note this cycle:
- NFLX: April 16
- SNAP: April 23
- FB: April 24
- AMZN/MSFT: April 25
- GOOGL: April 29
- AAPL: April 30
Subscriber Update for This Week: This Friday is Good Friday and a Market Holiday; since there’s no point in me producing a report on both Thursday night and Saturday as well, I will skip the Thursday report and just produce the normal Weekend Edition on Saturday.
Subscriber Update: 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.
Here is Alex’ video on EMs and Straddles from this weekend, if you didn’t catch it before.
Offensive Actions
Offensive Actions for the next trading day:
- No trade entries tomorrow.
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 somewhat weak with -112 advancers minus decliners.
SPX Market Timer : The Intermediate line rose into the Upper Reversal Zone, now showing a bullish bias. Another strong bearish cluster for the second day in a row.
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 uptrend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX fell to 12.33 after peaking at 50.3 a year ago, inside the bollinger bands. The RVX flattened at 16.30 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 on the latest pullback. 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. All indices that we track recently showed 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 ,S&P500, and /NQ have now printed a Golden Cross. Only the Russell 2000 remains in a death cross and it will signal a Golden Cross within days.
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 35, in exhaustion from the uptrend. The Daily chart is showing a level of 30 which is well into exhaustion. 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.
Other Technicals: The SPX Stochastics indicator rose to 92, overbought. The RUT Stochastics indicator rose to 85, overbought. SPX MACD histogram fell above the signal line, showing a loss of upside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2785 and resistance at the upper band at 2928 with price is below the upper band. The RUT is inside the Bollinger Bands with its boundaries at 1507 to 1602 and price is below the upper band.
Position Management – NonDirectional Trades
I have the following positions in play:
- SPY 12APR 285 Long Straddle entered (4/1) for $4.68 debit.I closed this trade (4/12) for $5.25, creating a $53 profit/contract or an 11.3% return on capital. The EM on this series was 5.678 for 12APR for an upside target of 288.16, yet the price moved to an eventual high of 290.47 and it was a struggle to profit from this trade. It’s the IV crush that kills straddles on upside moves.
- SPY 15 APR Long Straddle entered (4/11) for $1.90 debit with a 2.312 EM for Monday equaling a target of 290.6. We more than hit that by Friday, yet the best I could do was to cover this not long after the opening bell for $2.21 credit. This gave me a $27/contract profit or a 14.2% return on capital.
Per my Thursday update I used the JPM earnings pop to clear both straddles into strength. I could have held on to the 15APR straddle to see if we’d encounter another Monday morning rally but it felt like looking a gift horse in the mouth not to close it.
No additional entries at this time. I’m not in favor of setting up HP Iron Condors in this environment as we don’t have much IV edge these days.
I have the following positions in play:
- SPX 18APR 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. The price is currently outside the profitable zone of this trade as the price has rallied over 100 points in the time since entry.
- SPX 10MAY 2860/2865*2950/2955 Iron Condor (4/15) entered for $2.50 credit. My goal is to secure a 25% return on risk.
No additional trades at this time.
I have no current positions:
Calendar spreads are good for markets in quiet/trending character. 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, and were closed (4/4) for $.10 debit.
- PFE 17MAY $39 puts (3/18) sold for $.39 credit. I will look for a $.10 debit to remove. It would be a good idea to clear this one prior to 4/30 earnings.
No additional trades at this time. We need to be patient to wait on the next pullback. We are “green light” again because the death cross has cleared on most of the indices that we track.
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 this trade will expire. I said at the time that this was a low-probability, highly-aggressive trade and I guess that was the correct read.
Crypto has had relative strength over the last few weeks and no one believes this rally. The Bear appears to be over and I’m looking for one last shake-out to signal this.
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 290.16, there is a +/-2.791 EM into this coming Friday; this is about the same as last week’s 3.11 EM because there is one fewer day this week. The EM targets for this Friday’s close are 292.95 to the upside, and 287.37 to the downside.
A test of the lower EM should be a signal to fade that test to the upside
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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 the following positions in play at this time:
- TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit. We will look for a 50% return on this trade. Earnings have already passed for TGT.
Several candidates look really good, like MCD, NFLX, and PEP but we are too close to earnings to take them.
We are also keeping an eye on the Momentum stocks in this section. MSFT looks great but again too close to earnings.
No other entries at this point.
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)