Daily Market Newsletter
May 2, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
May Expiration
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Market Commentary
A second day of hangover after yesterday’s FOMC policy release, with investors still moaning about not being able to expect an interest rate cut prior to year-end. The Fed Funds Futures now show a 49% probability of a cut into year-end. The CNN Fear and Greed index is at 59%, which is a perfect Goldilocks number. But the best news today was the Russell 2000 picking up a bid.
My LP Iron Condor *finally* fired today for our 25% return. That’s the first successful one in some time. Being an option seller has not been lucrative unless you’re selling puts lately.
Strategies to play? We should be looking for pullbacks to sell puts against assets that we want. We should be looking for momentum breakouts. Nothing else will work in this environment.
The majority of S&P earnings will be played out by the end of this week.
Earnings Updates – the following companies of note will be reporting over the next few days:
- Friday: No standouts
Most of the storyboard stocks have already reported earnings.
Subscriber Update 1: I will be traveling this weekend so the weekend report will come out on Sunday.
Subscriber Update 2: I will be out of the country and not producing the report from Monday May 20th until Thursday June 6th; in my stead will be a very talented guy by the name of Alex who has started to do some guest videos (below) so that you get used to his voice and style.
Please sign up for our free daily crypto report here.
I’ll retain Alex’s weekend update for a few days. This segment helps you look at your portfolio and risk through a slightly different lens. Enjoy!!
Offensive Actions
Offensive Actions for the next trading day:
- I will set up the next series of short calls on SLV by selling the 19JUL $15 calls; see “stocks” section below. I will keep this as an open order.
- I’ll look for new offense this weekend..
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.
- Closing orders have been entered for all new spreads.
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 and breadth ended the day mixed with +60 advancers minus decliners.
SPX Market Timer : The Intermediate line fell in the Upper Reversal Zone, still showing a bullish bias. No leading signals but close to a weak bullish cluster.
DOW Theory: The SPX is in a long term uptrend, an intermediate uptrend, and a short-term downtrend. 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 downtrend.
VIX: The VIX fell to 14.42, inside the bollinger bands. The RVX rose to 18.17 and is outside the bollinger bands.
Fibonacci Retracements: The price has moved through several important Fib levels and is not caring about any confluence levels that these present. The recent retracement did not even get to the 23.6% fib retracement on the latest pullback. We’ll see if fibs start to matter again.
Support/Resistance: For the SPX, support is at 2700 … with no overhead resistance. The RUT has support at RUT 1500 with overhead resistance at 1600 and 1742. All indices that we track recently showed a Death Cross with the 50ma crossing below the 200ma; this can be a leading signal for a true Bearish move. It can also signal “false” and create a massive swing higher. We might be seeing the latter scenario as the Dow ,S&P500, and /NQ have now printed a Golden Cross. Only the Russell 2000 remains in a death cross and it will signal a Golden Cross within days.
Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 53, yet is starting to reflect the reversion to the larger uptrend again. The Weekly chart has an energy reading of 34, in exhaustion from the uptrend. The Daily chart is showing a level of 57 which is fully-charged again. These readings say that we should expect maybe one more week of choppy price behavior but will see sharp moves during this chop.
Other Technicals: The SPX Stochastics indicator flattened at 81, overbought. The RUT Stochastics indicator fell to 63, mid-scale. SPX MACD histogram fell below the signal line, showing a loss of upside momentum with negative divergence. The SPX is inside the Bollinger Bands with Bollinger Band support at 2870 and resistance at the upper band at 2951 with price is below the upper band. The RUT is inside the Bollinger Bands with its boundaries at 1559 to 1599 and price is below the upper band.
Position Management – NonDirectional Trades
I have the following position in play:
- SPY 17MAY 282.5/283.5*297/298 Long Iron Condor (4/22) entered for $.16 on the put side and $.17 on the calls. I will look for a 200% return on either side as a closing order GTC. We’ll see if the price runs to an 8 point EM by mid-May, last week was good for 3.4 points of that alone.
I’m not in favor of setting up HP Iron Condors in this environment as we don’t have much IV edge these days.
I have the following positions in play:
- SPX 10MAY 2860/2865*2950/2955 Iron Condor (4/15) entered for $2.50 credit, and closed (5/2) for a $1.85 debit. This gave me a net profit of $57/contract, or a net 22.8% return on risk after commissions.
No additional trades at this time.
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 will go out to the 19JUL series and sell the $15 calls for at least $.15 credit.
- PFE 17MAY $39 puts (3/18) sold for $.39 credit. Pfizer has reacted well to the 4/30 earnings, so we might be able to clear this one at our $.10 debit exit target yet.
No additional trades at this time. We need to be patient to wait on the next pullback. We are “green light” again because the death cross has cleared on most of the indices that we track.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking for the next signal.
- 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 – I set up a long swing trade on the Russell 2000 via the IWM (4/24), with a 24MAY IWM 163/164 debit call spread (4/24) for $.20 debit. I will look for 100% return on this trade.
Crypto has had relative strength over the last few weeks and no one believes this rally. The Bear appears to be over and I’m looking for one last shake-out to signal this.
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 Thursday’s close at SPY 293.41, there is a +/-3.775 EM into this coming Friday; this is slightly larger than last week’s 3.268 EM. The EM targets for this Friday’s close are 297.19 to the upside, and 289.64 to the downside.
Yesterday I discussed how the test of the lower EM would be a good trade setup. That exact scenario showed, so I took the 3MAY 290.5 call for $.85 and sold it in the early afternoon for $1.40. This gave me a per-contract profit of $53. I will not look for another setup tomorrow.
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:
- TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit. We will look for a 50% return on this trade. Earnings have already passed for TGT, but this one took it on the chin the other day as AMZN announced one-day delivery.
- SBUX 31MAY 77/78 debit call spread (4/29) entered for $.48 debit. I will look for a 50% return.
Several candidates look really good but we are too close to earnings to take them. This will ease up into next week.
We are also keeping an eye on the Momentum stocks in this section.
No other entries at this point.
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.