Weekend Edition Newsletter
June 29, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
July Expiration
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Market Commentary
We got our expected end-of-quarter window dressing to make June a special month for those that just follow markets month-to-month, and it certainly got some ink yesterday. But that move higher just offset a miserable month of May, so it’s no wonder that everyone is “neutral” and confused.
Markets are mean-reverting; when conditions get too bearish too quickly, as they did in May, markets tend to revert to the mean. And when they get too frothy, as they did in April, the same thing happens. And this is why I think that we might be looking at absolutely nothing happening in the next couple of weeks.
Everything is already priced into the pie, even the opinion that the Fed (despite recent posturing) will more than likely cut rates one quarter-point in about a month at the end of July.
The last time that I recall this lack of drama was about this same time three years ago in 2016, which was right before the “Brexit” shocked every market out of a several-week funk.
Overall I think markets are bound to go higher, but to get there, they need the assistance of the bears getting too loaded up on bad news. This has been the recipe for the past ten years.
Subscriber Alert: This is a holiday trading week with associated light volume. Markets will close a 1pm ET on Wednesday, and will be closed all day on Thursday to celebrate Independence Day. There will be no newsletter produced on Thursday of this week.
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:
- Looking to enter long call spreads on V and SBUX on Monday AM; see “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 average Friday with advancers minus decliners showing a very strong value of +329, with the highs of the session near the close at +360
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still bullish. The two weaker timeframes were showing a Weak Bullish Cluster in the Lower Reversal Zone Wednesday; in a bull move this is a leading signal for a bounce as we saw. Now this chart is once again approaching a Full Bearish Cluster.
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 15.08, inside the Bollinger bands. The RVX fell to 18.05, 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 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 55. The Weekly chart has an energy reading of 53, starting to pick up on the uptrend. The Daily chart is just about charged up again with a reading of 48. 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 77, below overbought. The RUT Stochastics fell to 62, mid-scale. The SPX MACD histogram fell above the signal line showing a decrease in momentum. The SPX is below the upper Bollinger Bands with support at 2787 and resistance at the upper band at 2994. The RUT is below the upper Bollinger Band with its boundaries at 1483 to 1573.
Position Management – NonDirectional Trades
I have no positions in play at this time.
We might be back with this strategy next week as all three timeframes are almost wound up again. I will probably initiate a new position this week.
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.
We actually used the extremely high gamma of expiration day to help improve our profits on the exit, although that is not a long-term dependable way to trade. 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 stayed within the EM barriers last week and no tests were found; this also allowed us to score on our LP Condor for the week. This might be another week in which we can look to fade either EM marker.
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 will look for a 50% return on this trade.
I will look to add V and SBUX positions on Monday with 26JUL options. I will discuss 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 no positions at this time.