Daily Newsletter
July 3, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
July Expiration
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Market Commentary
Bad news is “good news” again, as it has been for the past ten years. The game of musical chairs continues, with the ADP private payroll report coming in light this morning (102k actual vs. 140k consensus) so that gave the Fed one more reason to actually cut rates later this month.
And that gave the markets impetus to hit all-time highs in the Nasdaq, the Dow, and the S&P. Most notably the S&P500 futures hit the 3000 level right at today’s close, which was just after 1300ET. That is not the sign of a market that is about to execute an about-face, buying into the close is a very bullish sign and one more reminder that we might see prices release in a big way to the upside shortly, as the charts are massively coiled and we’re just waiting on the “move.”
Subscriber Alert: This is a holiday trading week with associated light volume. Markets will be closed all day on Thursday to celebrate Independence Day. There will be no newsletter produced on Thursday of this week; see you back here on Saturday for the Weekend edition.
Short-Term Outlook: We’ve been in a massive consolidation pattern 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, but we’ll know which price levels to respect to warn us if that energy’s going lower instead.
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Offensive Actions
Offensive Actions for the next trading day:
- Not looking to enter any additional positions this week.
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.
- I will look to close SBUX Friday.
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 with advancers minus decliners showing a strong value of +356, closing near the highs of the session.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still bullish. The two stronger timeframes are now showing a Strong Bearish Cluster in the Upper Reversal Zone for the third day in a row; this can be a leading signal for a pause.
DOW Theory: The SPX is in a long term uptrend, an intermediate trend, 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 fell to 12.57, below/outside the Bollinger bands. The RVX fell to 15.70, and is below/outside the Bollinger bands.
Fibonacci Retracements: Fibs are out of play now with the price near all-time highs.
Support/Resistance: For the SPX, support is at 2730 and resistance at 2964. The DOW has support at 24800 and resistance at 27000. The RUT has support at 1460 and resistance at 1618.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 52. The Weekly chart has an energy reading of 48, starting to pick up on the uptrend. The Daily chart lost energy on the breakout with a drop to 37, just into exhaustion. Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes, but the daily chart needs a rest from the recent bounce.
Other Technicals: The SPX Stochastics indicator flattened at 74, below overbought. The RUT Stochastics fell to 58, mid-scale. The SPX MACD histogram rose above the signal line showing an increase in momentum. The SPX is at the upper Bollinger Bands with support at 2843 and resistance at the upper band at 2994. The RUT is at the upper Bollinger Band with its boundaries at 1498 to 1580.
Position Management – NonDirectional Trades
I have no positions in play at this time.
We might be back with this strategy soon when all three timeframes are wound up again.
I had the following positions in play:
- SPX 28JUN 2925/2930*2975/2980 Iron Condor (6/24) entered for $2.50 credit. I closed the position (6/28) right at the opening bell for a $1.40 debit. This gave me a net profit on the position of $102 after commissions, or a 40.8% return on risk.
I rarely take trades like this but we might look for more of these very short-term, risk-limited opportunities in the near future as I believe we’ll see a very choppy summer period.
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; if we see the daily chart go into exhaustion I’ll set up a back week calendar.
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 sold the SLV 19JUL $15 calls (6/20) for $.15 credit.
- CSCO – I sold the 16AUG $50 puts (6/10) for a $.64 credit. I will look to close this one for $.05 to $.10 debit.
We’ll see if any subsequent pullbacks in the short term allow better entries.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking at the next signal; I would like to see a pullback first closer to the 21ema.
- 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 – None at this time..
Crypto “top ten” coins have been positive since early April, and Bitcoin has gone parabolic above $10k again. The Bear appears to be over. In the near term I expect to see large consolidation swings, which might provide “value” entries for these coins on a dip.
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 293.00, there is a +/-5.265 EM into this coming Friday; this is somewhat larger than last week’s 4.565 EM. The EM targets for this Friday’s close are 298.27 to the upside, and 287.74 to the downside.
The price blew through the upper EM today, well before Friday’s expiration. Seems that someone knew something and had priced that into the EM for the week.
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:
- MCD 26JUL 205/207.5 Debit Call Spread (6/24) entered for $1.22 debit. I closed this position (7/3) for a $1.85 credit. That gave me a net $59/contract profit after commissions, which created a 48.3% return on capital. .
- SBUX 26JUL 85/86 Debit Call Spread (7/1) entered for $.50 debit. I will look for a 50% return on capital but will remove this position on Friday for a profit.
No other positions at this time.
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.