Daily Market Newsletter
January 9, 2017Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
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January Expiration
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Market Commentary
Can you believe that the iPhone is now ten years old? An investment in AAPL back then would be worth about 12x that amount today. And that begs the next question, what will be the “next” AAPL? Look at how their products changed the world and turned the convention of the “cell phone” upside down. The next stock that does that kind of move will be one that no one understands now because they’ll be doing things differently than the conventional methods. Unfortunately, everything that AAPL does now is “conventional.”
My own feeling is that to be successful in the coming age, investors will need to be even more willing to embrace the unconventional and the disruptive, because that is where the money will flow. It will not make sense to most to see money flowing into a “nobody” stock, yet it might make sense a year later as the product/service becomes mainstream. I am expecting innovation and disruption to roar in the coming years; the shackles are off.
If the above video does not work, please try this link.
Offensive Actions
Offensive Actions for the next trading day:
- Please note the Bearish SPY In/Out Spread listed below in “bearish trades.”
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 about average today. Breadth was fair with +116 advancers minus decliners.
SPX Market Timer : The Intermediate line rose into the Upper Reversal Zone, showing a neutral bias. After two days of showing a Strong Bearish Cluster the price faded today. No leading signals at this time.
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 downtrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX rose 2.12% to 11.56, inside the bollinger bands. The RVX rose 2.85% to 18.02 and is inside the bollinger bands.
Fibonacci Retracements: The SPX has recently retraced about 23.6% of its election rally. The more important 38.2% fib retracement sits at the 2203 level.
Support/Resistance: For the SPX, support is at 2188 … with overhead resistance at 2277. The RUT has support at RUT 1300 with overhead resistance at 1393. All three major index charts that we follow are now showing a Golden Cross with the 50 day moving average crossing above the 200 day average.
Fractal Energies: The major timeframe (Monthly) is still charged with a reading of 43. The Weekly chart is declining with an energy reading of 39, due to the recent breakout. The Daily chart is showing a level of 49 which is completely recharged again; we are seeing the expected short consolidation at this level but it’s not going to last much longer as the daily energy must go somewhere. It appears to be pulling to the downside for now.
Other Technicals: The SPX Stochastics indicator flattened at 53, mid-scale. The RUT Stochastics indicator flattened at 44. mid-scale. The SPX MACD histogram fell slightly below the signal line, showing a loss of upside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2244 and resistance at the upper band at 2280 and is below the upper band. The RUT is back inside the Bollinger Bands with its boundaries at 1351 to 1388 and price is above the lower band. The Bollinger Bands are starting to squeeze, especially on the RUT.
We are seeing the market pricing in a shift in character out of the recent lifeless Fed-driven economy, and into an unrestrained one. I think this will bring about a big shift in how the market behaves.
Position Management – NonDirectional Trades
Offense: I still do not want to set up OTM credit spreads in this low-vol environment until we see real movement to the downside. If and when we get this movement we’ll need to identify levels that we want our credit spreads to be “below.” This is the same type of price action that was so perilous to HP condors back in 2013, so let’s not fight it.
If I see price drop to the SPX 2200 level, this might be our first opportunity to sell premium against that level.
I have no current positions:
I expect movement very soon so I’ll put this strategy on the shelf until I see the next signal.
I have no current positions. If I see this current move continue to the upside, I’ll start to look for exhaustion signals that line up with resistance, and then sell Weekly Diagonals again.
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:
- SDS Stock – I still own 100 shares of this stock from 2011 and will continue to write calls against this position with every correction/pullback.
- VXX Stock – I own 12 shares of this stock and will hold until Armageddon occurs.
- SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level, and will continue to write time against these shares on every rally. I will look to sell more calls in the next bounce higher in SLV. If the price continues pulling back, I will likely sell more puts against the $13 level if I can secure them for at least $.15 credit.
- GE JAN17 30 puts (11/28) – I sold five contracts of $30 puts for $.39 credit. I will look to sell FEB17 $29 puts if the pullback continues.
- TWTR JAN17 $15 puts (11/30) I sold ten contracts of $15 puts for $.22 credit, and added another ten contracts (1/3) of $13 FEB puts for $.20. I don’t care about the recent bad press.
- RIG JAN17 $12 puts (12/8) I sold ten contracts of $12 puts for $.18 credit. I will see if the pullback gets a little stronger.
I will be continuing to “bottom fish” in the subsequent weeks to identify stock candidates that I would want to own long-term. Last week’s dip didn’t give me much of an opportunity to secure new positions.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover -This one is gone. Looking for the next crossover, however it will be to the downside, and the first downside crossover is usually a poor signal. .
- RSI(2) CounterTrend – Awaiting the next signal.
- Daily S&P Advancers – if I see the number of daily S&P500 advancers drop into single digits near the close of any trading day, I will go long shares of the SSO.
I am changing this section to “earnings” trades. Watch for more this week.
No positions at this time.
I am going to set up a SPY 10FEB 225.5/227.5 debit put spread tomorrow, or equivalent $2-wide spread in/out of the money tomorrow depending on the gap…..currently showing about an $.80 debit.
I have the following positions.
- 20JAN SPY 228/230/232 call butterfly (1/5) was entered for a $.34 debit. I was thinking of closing this position on Monday but there’s little harm in carrying it a few days further to see if the price wants to grind higher into the inauguration.
Quite honestly, selling the “financing” trades has been a huge challenge in this low-vol environment. I will only sell put spreads on decent pullbacks that allow me to secure put spreads 10% OTM
We currently have the following positions in play with this strategy:
- SPY JAN17 193 Long Puts – I entered this position (10/24) for a $1.33 debit.
- SPY FEB17 200 long puts – I entered this position (12/7) for a $.95 debit.
- SPY MAR17 203 long puts – I entered this position (12/28) for a $1.07 debit.