Daily Newsletter
October 15, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
October Expiration
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Market Commentary
Earnings today featured some great reports across the board which led to a large trend day reaction to the upside on relatively light volume. The Bears quietly covered and stepped aside without a fight. All of the reporting financial stocks did well, as did Charles Schwab. I doubt that we will see this continue unabated tomorrow since good news was likely priced in for the rest of this week.
Can the price break the recent tight range in the index charts or do we take one more trip to the basement first?
The following companies report earnings over the next few days::
- Wednesday: AA, BAC, BK, IBM, NFLX, USB
- Thursday: MS, PPG, UNP,
- Friday: KO, SLB
- Monday: HAL
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 will enter a bearish put spread tomorrow on the SPY; see “synthetic short” 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 below-average today with advancers minus decliners showing a relatively strong number of +292 at the closing bell.
SPX Market Timer : The Intermediate line has turned up below the Upper Reversal Zone and is now “Bullish.” No leading signals at this time however this chart is close to showing a bearish cluster.
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 13.50, inside the Bollinger bands. The RVX fell to 17.39 and is outside the Bollinger bands.
Fibonacci Retracements: The price is back near the highs and fibs are not in play.
Support/Resistance: For the SPX, support is at 2825 and overhead resistance at 3028. The DOW has support at 25500 and overhead resistance at 28399. The RUT has support at 1450 and resistance at 1600.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 52. The Weekly chart has an energy reading of 66, now fully-charged. The Daily chart is showing 50, almost recharged from the downdraft . Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes.
Other Technicals: SPX Stochastics rose to 48, mid-scale. RUT Stochastics rose to 30, above oversold. 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 2889 to 3028. The RUT is inside the bollinger bands with the range 1457 and 1577.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 18OCT 289/290*308/309 Long Iron Condor (9/16) was entered for a $.16 debit on the put spreads and an $.18 debit on the call spreads. The put spreads fired at our target (10/2) of $.48 which means that we made a net profit after commissions of $28/contract on the put spreads, and still hold the call spreads. I will see if any rally higher in the near term allows us to harvest some value from the call spreads..
- 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 will look for a 200% return on either side. Not enough gamma to get the put side to fire on the recent downdraft.
No additional orders at this point.
I have no positions in play:
This is not the right character of market for this strategy at this point.
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 $48.80/share prior to the latest trade. I sold the JAN20 $50 calls for $1.94/contract so our cost basis could be as low as $46.86 depending on the outcome of those JAN calls. Our shares also went ex-dividend on Thursday so that’s another $35/contract so our cost basis could now be as low as $46.51. I don’t want to see this trade below $46/share on a closing basis.
No other trades at this time.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – The short signal has fired; I do not take these in an overall positive market. I will look for the next positive cross.
- 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..
Crypto has been in a consolidation after last month’s downdraft. We might need to see one final capitulation before it can release.
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 296.28, there is a +/-5.223EM into this coming Friday; this is about the same as last week’s 5.442 EM. The EM targets for this Friday’s close are 301.50 to the upside, and 291.06 to the downside.
The price blew through the lower Weekly EM last week, and almost tagged the upper EM marker in the same week. We did have an EM fade trade this past week but it was not the classic “test and stay in the range” type.
I’m going to play a downside bear put spread tomorrow just as more of a low-cost hedge in case the price falls in the gutter in the near term.
I will enter a SPY 15NOV ATM debit put spread with $1-wide strikes, such as the SPY 15NOV 300/301 debit put spread, for a max of $.50 debit.
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 positions in play at this time:
No additional orders today.
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 open positions at this time. Skew is making OTM puts really expensive now.
If we see a decent bounce back up I might consider reloading.