Daily Newsletter
December 23, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
January Expiration
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Market Commentary
Another consolidation, small-range day after Friday’s gap and run. There are many, many gaps below the current price and the fact that we haven’t seen the market bother to close any of these gaps tells us something about the supply-demand imbalance in place.
Expect tomorrow to have an initial early move, then volume tailing off after the first hour as traders swivel-chair out of the office and off to holiday events. Markets will cease trading at 1300ET tomorrow.
Short-Term Outlook: Prices are breaking from a massive consolidation pattern in play since early 2018, or almost another “horizontal bear market” like we had in 2015-2016. All that energy that’s been coiled up has to go somewhere, the policy and odds favor it to go higher, and the first weekly trend is playing out in that direction yet might be nearing completion..
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Offensive Actions
Offensive Actions for the next trading day:
- I’ll look for a potential long on INTC per the “Whale” section below. The price ran from my entry on Monday morning. We’ll try again 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.
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 average today, with the advancers minus decliners showing a mixed value of -50 today.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still “Bullish.” This chart is showing the Strong Bearish Cluster (with the two strongest timeframes overbought) after the relatively rare Full Bearish Cluster showed on Friday with all three timeframes in the Upper Reversal Zone.
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 sideways trend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX rose to 12.61, inside the Bollinger bands. The RVX rose to 14.79 and is inside the Bollinger bands.
Fibonacci Retracements: The price is into new highs again and no point in looking at retracements yet.
Support/Resistance: For the SPX, support is at 2825 with no overhead resistance. The DOW has support at 25500 and no overhead resistance. The RUT has support at 1450 and resistance around 1742.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 41, and is starting to reflect the very linear trend from late 2018. The Weekly chart has an energy reading of 28, deeper into exhaustion. The Daily chart is showing 28, into exhaustion again. We’re seeing a runaway bull once again but both Weekly and Daily charts into exhaustion. Very few daily trends continue when the energy level is at 25 or lower, as it was on Friday..
Other Technicals: SPX Stochastics rose to 90, overbought. RUT Stochastics rose to 90, overbought. The SPX MACD rose above the signal line, showing an increase in positive momentum. The SPX is at the upper bollinger band with the range 3083 to 3229. The RUT is at the upper bollinger band with the range 1596 and 1678.
Position Management – NonDirectional Trades
No positions in play at this time: If we get another week or two of upside movement, we’ll set up another Long Condor regardless of the energy levels.
I have the following positions in play:
- SPX 23DEC 3015/3020*3150/3155 Iron Condor (12/3) was entered for a $2.50 credit. I closed the call spreads (12/23) for $5.00 debit as this trade went for a full $250 loss. We had really good conditions to expect a transition to consolidation, but the triggering pullback turned the price move into a full slingshot and quickly overwhelmed the call spreads. I should have followed my instinct to cut my losses as the price broke above SPX 3150 but that’s not in my exit rules.
No further trades with this strategy until this parabolic runaway move terminates and volatility gets out of the gutter.
I have no current positions:
Calendar spreads are good for markets in quiet/trending character. The issue that we have in the short run is the volatility inflation on the back end of the curve, implying that we’ll see movement into January, but none is priced into options in the short-term. We’ll have to wait until January to kick our offense off.
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. Looking for the next rally to sell calls against.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – The long cross has fired and is gone. The next entry would be off of the 21ema which occurred the week of Dec 2.
- RSI(2) CounterTrend – I’ll look for the next setup.
- Daily S&P Advancers – Looking for the next signal to go long with single-digit advancers to close the day.
- Swing – None at this time..
BTC and other top-ten coins are once again in a downtrend; could this be the final capitulation after slipping into a Bear almost two years ago?
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 320.73 there is a +/-2.897 EM into this coming Friday; this is much smaller than the 5.004 EM from last week. The EM targets for this Friday’s close are 323.63 to the upside, and 317.83 to the downside.
We will continue to look for downside tests of the weekly EM. The upper EM was almost hit on Friday, even though it was larger-than-normal.
I have no positions in play:
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:
- PYPL 3JAN 108/109 debit call spread (12/2) was entered for $.50 debit. I will seek 50%.
- DIS 10JAN 147/148 debit call spread (12/13) was entered for $.49 debit. I will seek 50%.
- WMT 24JAN 121/122 debit call spread (12/16) was entered for $.50 debit. I will seek 50%.
- V 24JAN 185/187.5 debit call spread (12/17) was entered for $1.25 debit. I will seek 50%.
- COST 24JAN 295/297.5 debit call spread (12/23) was entered for $1.25 debit, seeking 50%.
I’ll look for a $.50 debit on a $1 spread width for INTC, using 24JAN call options.
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 the following open positions at this time:
- SPY 21FEB 279 long puts (11/15) entered for $2.21 debit. I will look to clear half of the position on any test of the 200 sma, and the other half upon a 10% haircut in price.