Daily Market Newsletter
May 15, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
May Expiration
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Market Commentary
Bad Retail Sales this morning led to early weakness, but the news that Trump was going to delay auto tariffs for six months allowed the market to kick the can down the road and led to a fairly substantial, broad-based rally today. Don’t drink the kool-aid just yet, as this bounce could end up in a “lower high” on the next negative catalyst, which these days is only a tweet away.
It’s fascinating to me how the market absolutely ignored the Tweet storms in 2017 and climbed the wall of worry in a manner that we have rarely seen, but now seems to have lost its nerve. It’s not that the tweets are more inflammatory, it’s that there is much more to risk at today’s asset prices. Think “Wallenda walking a tightrope” and you get the picture. And we have the bond market pricing in a 75% chance of a rate cut by December.
I have been experimenting with the new “micro eminis” this week and it’s really a nice solution. They are far more liquid than I would have imagined, and track the regular eminis pretty well. The problem has been RISK trading the “normal” eminis. When you have the price fibrillating in 20 point chunks on the NASDAQ, it’s very easy to get taken out even with a ten point stop and that’s $200/contract missing in an instant. The tape has gotten very “angry” lately and very difficult to trade without super-wide stops. Enter micros. They only risk $2/point on the NASDAQ vs. $20 for the regular size. (I would imagine that the S&P micros are $5/point but am just guessing) The problem, though, is commissions. The “usual suspects” are still charging me $5/round trip so that means I need to book at least 2.5 points/contract just to break even. That’s kinda like forex trading! There are some other broker solutions that I might pursue.
Strategies to play? This might be a time for caution to let this drop play out. This is doing a perfect job of recharging the weekly chart. Let’s not be in a rush to buy the dip just yet.
Subscriber Update: I will be out of the country and having guest talent Alex produce the report from Monday May 20th until Thursday June 6th. Alex has started to do some guest videos (below) so that you get used to his voice and style. I will also NOT be setting up any positions that require any attention, they will be more of the “fire & forget” version. Once I return on June 7th we’ll be setting up trade positions again, unless Alex spots some good opportunities that he wants to share.
Please sign up for our free daily crypto report here.
Here is Alex’s weekend video discussing “volatility” trading strategies.
If you have any questions, please feel free to contact him by email at: alex_docs_trading@outlook.com
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.
- No new orders for tomorrow.
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 only modestly higher with +153 advancers minus decliners. The high-water mark today was +297 advancers minus decliners.
SPX Market Timer : The Intermediate line fell from the Upper Reversal Zone, now showing a bearish bias. No leading signals at this time..
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 16.44, back inside the bollinger bands. The RVX fell to 19.56 and is back inside the bollinger bands.
Fibonacci Retracements: The pullback has pulled price down to the 61.8% retracement of the March/April swing.
Support/Resistance: For the SPX, support is at 2791 … with overhead resistance at 2954. The RUT has support at RUT 1500 with overhead resistance at 1617 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, RUT, and /NQ have now printed a Golden Cross.
Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 54, yet is starting to reflect the reversion to the larger uptrend again. The Weekly chart has an energy reading of 46, gaining energy on this pullback. The Daily chart is showing a level of 50 which is charged again and starting to recover from the bounce. This price action is doing an excellent job of recharging the Weekly chart and we’re almost looking at three primary “charged” charts again, which is a precursor to a big move.
Other Technicals: The SPX Stochastics indicator fell to 40, mid-scale. The RUT Stochastics indicator fell to 45, mid-scale. SPX MACD histogram rose below the signal line, showing a return of upside momentum. The SPX is back inside the Bollinger Bands with Bollinger Band support at 2828 and resistance at the upper band at 2978 with price is just above the lower band. The RUT is inside the Bollinger Bands with its boundaries at 1533 to 1620 and price is above the lower 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. The puts were closed (5/13) for a $.48 credit. This gave us a net $140 profit from the puts alone. When we set up this trade on 4/22 we had expected an 8 point EM, and that came to realization on the pullback. Now we’ll see if we can harvest any value from the calls to increase our profits.
If we see a little further pull to the downside, we might want to consider setting up a HP put credit spread on the SPY.
I have no positions in play at this time.
No additional trades at this time; the timing is absolutely crucial on these trades so we have to find absolutely exhausted conditions prior to taking these entries.
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.
I still like AMD but we should let this overall market pullback play out.
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 had a fairly broad rally today with Bitcoin walking sideways, so people were taking BTC profits and investing into beaten-down altcoins. The bear is over in the big-cap space; we’ll see if rotation occurs soon and the Alts join the party.
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 288.10, there is a +/-5.539 EM into this coming Friday; this is about 50% larger than last week’s 3.477 EM. The EM targets for this Friday’s close are 293.64 to the upside, and 282.56 to the downside.
The lower EM got blown through this week after only one day. This was our “go-to” fade but the price level did not support the first test, so this trade is off for this 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:
- 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. This one will expire OTM on Friday.
- SBUX 31MAY 77/78 debit call spread (4/29) entered for $.48 debit. I will look for a 50% return.
- MCD 7JUN 197.5/200 debit call spread (5/6) entered for $1.14 debit. I will look for a 50% return.
We are also keeping an eye on the Momentum stocks in this section. Most of those are a little extended at this point and this pullback might do the rest of the market a lot of good. I would like to let the market settle first before going heavily long.
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.