Daily Newsletter
July 27, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
August Expiration
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Market Commentary
Markets are back to the “greed” reading after being in “fear” just last week. There’s a feeling from investors that they are walking on glass. So far the 2Q reporting season has gone well, with the majority coming in above expectations, easing the concerns felt at the beginning of this month that it was going to be a poor performance.
There’s no doubt that the S&P and the Dow are breaking higher and putting all of the monthly energy to work to the upside. It has been a “grinder” rally so far, with investors tepidly buying the highs. Again, this is very similar to the situation that we had in the markets three years ago, that we finally blasted loose through Brexit and then the US election. Until some catalyst comes from the outside to shake things up, we need to continue to remain long delta and long gamma.
That pretty much wraps up earnings season (the big boys) after AAPL releases this week, so this will somewhat liberate our offense. I typically do not play earnings releases as a strategy; I prefer to look for a trend breaking out after earnings and then riding that as the IV dissipates.
Earnings Reports: The following companies of note report in the next few days:
- Monday: nothing of note
- Tuesday: AAPL, BIDU, AMD, CELG, MO
- Wednesday: GE, plus mostly small-caps
- Thursday: VZ, X
- Friday: nothing of note
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:
- Look for long debit spread entries on ACN and MSFT in the “whale” section below.
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 below-average Friday with advancers minus decliners showing a modestly strong number of +216, closing near the highs of the day.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still bullish. No leading signals at this time but once again very close to a Strong Bearish Cluster with the two strongest timeframes being overbought.
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 sideways trend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX fell to 12.16, inside the Bollinger bands. The RVX fell to 15.72, and is inside 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 There is no overhead resistance. The DOW has support at 24800 and no overhead resistance. The RUT has support at 1460 and resistance at 1618.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 51. The Weekly chart has an energy reading of 45, starting to pick up on the uptrend but not into exhaustion. The Daily chart is showing 55, fully-charged and ready to move. Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes.
Other Technicals: The SPX Stochastics indicator fell to 68, below overbought. The RUT Stochastics rose to 37, mid-scale. The SPX MACD histogram rose below the signal line showing an increase in momentum. The SPX is below the upper Bollinger Bands with support at 2953 and resistance at the upper band at 303s. The RUT is below the upper Bollinger Band with its boundaries at 1544 to 1582. The Bollinger Bands are starting to “squeeze” on both the SPX and RUT, implying a forward move.
Position Management – NonDirectional Trades
I have the positions in play at this time:
- SPY 16AUG 290/291*306/307 Long Iron Condor (7/22) was entered for $.17 debit on both call and put sides for a total risk/debit of $.34. There is a 9.5 point EM into this expiration. I will look for a 200% return on either side.
Nothing to do at this point but place GTC orders and wait for movement.
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I have no positions in play:
I believe we’ll see a very choppy summer period and might try to take advantage of Weekly Short Iron Condors when we get the right signals.
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. I closed/rolled these options down for $.13 and opened up new SLV 30AUG $16 calls for $.16 credit, or a $.03 net credit on the roll. If the price of SLV gets up to $16 in the near term then I’ll roll further up/out again.
- 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 some entries in the short run.
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..
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 302.01, there is a +/-3.976 EM into this coming Friday; this is somewhat smaller than last week’s 4.117 EM, even though there is more potential headline risk. The EM targets for this Friday’s close are 305.99 to the upside, and 298.03 to the downside.
Last week’s upper EM marker got blown through again; we need to continue to focus on trading against the lower EM and not trying to stand in front of the freight train.
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:
- PEP 9AUG 133/134 Debit Call Spread (7/12) entered for a $.50 debit and will look for 50%.
I will look for 30AUG call debit spread entries on ACN and MSFT on Monday. I will discuss the challenges of entering these trades in today’s video.
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 positions at this time:
- SPY 18OCT 269 puts (7/23) were entered for $1.70 debit. I would clear this position on a re-test of the 200 dma.