Daily Market Newsletter
May 30, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
June Expiration
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Market Commentary
Hello all. It is Alex here covering for Doc who is on vacation for the next couple of weeks.
The Fear and Greed index tells it all. Yesterday’s chart presented to you in the newsletter had a reading of 27. Today, we sit at 24, in the Extreme Fear category. While we may be sitting in an extreme zone on the Fear and Greed Index, market movement isn’t signalling the same yet. While there certainly has been sell side pressure, we haven’t any waterfall sells and huge panic sell offs indicating that it we are going to see significant sell side activity there is still a lot of selling to be had before capitulation. The retail sector has taken it on the chin lately and should additional tariffs come into play over the course of the next month, the wallet of the average consumer is going to start shrinking as ultimately those tariffs will get pushed through. Even with the hit to some of the retailers there isn’t any blood in the street indicating anything close to panic.
On the Fractal Energy front, we saw the fractal energy drop slightly as a result of dropping off some larger earlier period candles. We still have significant energy on the daily – still up at 52. We are oscillating around the lower expected move and still have very good energies. While we took a breather / pause today there is still high energy across the board with lots of potential for more significant moves. There is no real economic news for the rest of the week, and the Brexit front should stay relatively quiet tomorrow as the fight over May’s seat unfolds. It is a roll of the dice as to where tomorrow’s market will go. Like usual, assuming the market opens quietly, I will be looking to put on a straddle for Monday and a long condor on for the following Friday. Risk and volatility are still very much alive so position yourself accordingly.
Everyone have a good weekend and I look forward to seeing you again on the weekend update.
Cheers
Alex
If you have any questions, please feel free to reach out to me at alex_docs_trading@outlook.com
Please sign up for our free daily crypto report here.
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 Monday.
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 slightly below average after digesting yesterdays move. The advancers versus decliners closed up at +88 after seeing opening levels as high as 422. The initial euphoria waned as the AD faded within the first couple of hours of trade
SPX Market Timer : The Intermediate, momentum and near-term lines are divergent and working their way lower in the bottom of the range. 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 sideways trend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term downtrend. All indices breached their support levels today with the SPX and RUT closing below support
VIX: The VIX edged its way lower by 3.4% ending the day at 17.30, inside the Bollinger bands. The RVX also losing 2.3%, closing at 20.46, and is inside the Bollinger bands.
Fibonacci Retracements: Price passed through the 23.6% retracement of the rally that kicked off on Boxing day. The 23.6% level was very close to the 2800 support level and now that it has lost support may well continue down to the 38.2% retracement level sitting at 2719.
Support/Resistance: For the SPX, having breached it’s previous support level opens the 2650 level which is also the 50% Fibonacci level with overhead resistance at 2954. The RUT breached it’s 1500 support level again with the next nearest support at the 1460 level with overhead resistance at 1617 and 1742.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 54. The Weekly chart has an energy reading of 51 and is starting to charge up further. The Daily chart dropped slightly due to dropping off the early period candles and is now sitting at 52. There is still more than enough energy for significant moves to still take place.
Other Technicals: The SPX Stochastics indicator dropped to 11, having triggered a cross-over last Friday. The RUT Stochastics similarly dropped to 11, breaching into the lower boundary but with no crossover. The SPX MACD histogram is below the signal line, showing re-affirmed heavy downside momentum. The SPX closed slightly above the lower Bollinger Band with support at 2769 and resistance at the upper band at 2943. The RUT remains slightly above the lower Bollinger Bands with its boundaries at 1486 to 1619.
Position Management – NonDirectional Trades
I have no remaining positions 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. The calls expired for a net $95 loss so our return on this trade was a net 27.2% after commissions.
With the S&P500 charts nearly at full energy again across the board, it might be time soon for another long condor.
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.
No additional stock plays until I return from travel 2nd week June; I’d like to see if the current pullback plays out a little deeper.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking for the next signal. I don’t like these signals to the short side.
- 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. At this point any kind of positive return on this trade would be welcome as I’m running out of time, a shame as this trade was within a penny of firing at my target.
Crypto had a big rally this week, and Bitcoin had a monstrous dump on Friday, effectively shaking off all of the late-to-the-party longs. So far the price action is positive.
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 285.84, there is a +/-5.309 EM into this coming Friday; this is about the same as last week’s 5.539 EM. The EM targets for this Friday’s close are 291.15 to the upside, and 280.53 to the downside.
The lower EM for this week lines up with the low test of last week, so this might be a good level to fade with an ITM call option should it be tested and offer support.
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 no remaining positions in play at this time:
- TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit and expired OTM for a net $254 loss on two contracts.
- SBUX 31MAY 77/78 debit call spread (4/29) entered for $.48 debit and closed (5/16) for $.72 credit. This gave me a net profit of $20/contract or 42% net return on capital after commissions. .
- MCD 7JUN 197.5/200 debit call spread (5/6) entered for $1.14 debit and closed (5/17) for $1.57 credit, giving us a net $39/contract profit or a 34.2% return on capital after commissions.
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.