Daily Newsletter
November 16, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
December Expiration
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Market Commentary
There’s little doubt that the next twelve months will feature some of the most confusing and difficult times for investors. Look at the last six months alone…dire warning about yield-curve inversions and how they “always led to recessions” convinced many investors to go to cash. The global economy is softening, GDP growth is shrinking, all the best minds were saying, “get out!”
But we’ve seen this movie before. I felt that markets normally went in the opposite direction as the public opinion, and so far that’s been correct. Monthly trends don’t just stop and reverse down, they thrash for months before the turn down. Well, we’ve now seen six strong weeks in a row to tack on about 220 points to the S&P’s and definitively break the price out above the consolidation zone of the last few months. It’s been a party:
But there can be too much of a good thing with the Sentimentrader.com “Dumb Money/Smart Money” spread being super-wide right now:
This is a reliable indication that sentiment is too frothy and that the “herd” is piling on. Although we have a clear breakout and clear sailing to the north, this is a very poor time to join the pile. Let’s continue to look long, but only on our terms. And a very sharp, steep pullback to re-test the latest breakout would be an excellent way to stoke up the fear again and trigger the upside slingshot.
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:
- I’m adding long call spreads on SLV for Monday morning; please see “Whale” section below for details.
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 above-average Friday, with advancers minus decliners showing a strong +295 at the closing bell.
SPX Market Timer : The Intermediate line has turned up into the Upper Reversal Zone and is now “Bullish.” This chart is now showing a rare Full Bearish Cluster with all three timeframes overbought. This can be a leading signal for a pause.
DOW Theory: The SPX is in a long term uptrend, an intermediate uptrend, 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 12.05, inside the Bollinger bands. The RVX fell to 15.47 and is outside the Bollinger bands. There is a pretty extreme bollinger squeeze happening on the VIX and RVX.
Fibonacci Retracements: The price is back to the highs and fibs are not in play.
Support/Resistance: For the SPX, support is at 2825 with no overhead resistance. The DOW has support at 25500 and no overhead resistance. The RUT has support at 1450 and resistance around 1608.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 48. The Weekly chart has an energy reading of 47, starting to reflect the recent breakout. The Daily chart is showing 38, into exhaustion again. Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes.
Other Technicals: SPX Stochastics flattened at 90, overbought. RUT Stochastics fell to 76, below overbought. The SPX MACD rose above the signal line, showing an increase in positive momentum. The SPX is below the upper bollinger band with the range 2986 to 3130. The RUT is inside the bollinger bands with the range 1543 and 1615.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 15NOV 281/282*310/311 Long Iron Condor (9/30) was entered for a $.16 debit on the puts and $.18 debit on the calls. I closed down the call spreads (11/7) for a $.38 credit; we broke even on the trade. Had I held this trade through Friday we would have secured a full profit on it. We got the “expected move” but it took too long to break the range.
- SPY 20DEC 296/297*319/320 Long Iron Condor (11/4) was entered for a $.17 debit on the puts and a $.16 debit on the calls. I will look for a 200% return on either side.
No additional positions now.
I have no positions in play:
- SPX 15NOV 3040/3045*3095/3100 Iron Condor (11/6) entered for $2.50 credit and closed (11/13) for $1.85 debit. This gave us a gross per-contract profit of $65, or a 26% return on risk.
No other entries at this time. We’ll need to see the SPX go into severe daily exhaustion again. This trend is too strong to fade for more than a couple of days.
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 SEP $17.50 calls (8/13) for $.18 credit and closed down this position (9/5) for a $.44 debit. I will let this price chart trend as much as it wants to in the near future before writing against it again.
- CSCO – My cost basis is now $46.18/share after the latest short call trade and dividend payment. I sold the JAN20 $50 calls for $1.94/contract and closed them out for $.15, (11/15) giving me a $177/contract profit. I will look for any kind of a dead cat bounce in the near future to unload CSCO shares into strength.
No other trades at this time.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – The long cross has fired and is gone. The next entry would be off of the 21ema.
- RSI(2) CounterTrend – I’ll look for the next setup.
- Daily S&P Advancers – Looking for the next signal to go long with single-digit advancers to close the day.
- Swing – None at this time..
BTC and other top-ten coins are once again in consolidation.
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 311.79 there is a +/-3.385 EM into this coming Friday; this is slightly larger than last week’s 3.103 EM. The EM targets for this Friday’s close are 315.18 to the upside, and 308.41 to the downside.
The price came up very close to testing the upper weekly EM level on Friday.
In this market we will continue to seek tests against the lower EM marker and not necessarily stand in front of the upper marker, since the trend has appeared to unfurl to the upside again.
I have no positions in play:
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:
- NKE 22NOV 96.5/97.5 debit call spread (10/21) entered for $.50. Only a week left in this one and this one has recently bounced higher; my job this week is to see if I can harvest anything at all on this trade.
- V 29 NOV 180/182.5 debit call spread (10/29) entered for $1.15 debit. I will seek a 50% return.
I will look to enter an SLV 20DEC debit call spread with $1-wide spreads on Monday. The current trade aftermarket would be the SLV 20DEC 15.5/16.5 call spreads .
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 open positions at this time:
- SPY 21FEB 279 long puts (11/15) entered for $2.21 debit. I will look to clear half of the position on any test of the 200 sma, and the other half upon a 10% haircut in price.