Weekend Edition Newsletter
September 14, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
September Expiration
Day(s)
:
Hour(s)
:
Minute(s)
:
Second(s)
Market Commentary
No one has any sense of what’s about to happen in the markets in the near future. We keep oscillating back and forth between extreme fear and complacency:
Just a week ago markets were registering “Extreme Fear” and now here we are once again at “Greed.” Markets are beholden to the Trade War and the Fed, swaying back and forth like an intoxicated sailor. Most markets that we follow are still entrapped by the same trading range that the price has been in since early 2018, building up a massive potential in the meantime. And in the midst of this uncertainty, the Yield Curve has inverted, adding to the uncertainty.
But something interesting happened this week; the Ten Year Note found support at about 1.5% and bounced higher. If rates drop below that level then I think that the Recession talk will spike again and fear will rule.
The probability of a rate cut this Wednesday continues to drop.
I personally do not believe that Powell will be able to thread the needle between how the Fed does business vs. how the Bond market thinks. I think this Wednesday’s Fed meeting has the potential to introduce a lot more uncertainty into the market and today’s trades will position us for that.
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.
Please sign up for our free daily crypto report here.
Offensive Actions
Offensive Actions for the next trading day:
- Due to the Friday drop in IV, I’m setting up another long SPY Condor; see “HP NonDirectional” 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
%
%
%
Technical Analysis Section
Market Internals: Volume was average on Friday with advancers minus decliners showing a mixed value of +42.
SPX Market Timer : The Intermediate line has turned up into the Upper Reversal Zone and is still bullish. After a Strong Bearish cluster on Thursday, that signal faded below the cluster level on Friday.
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 13.74, inside the Bollinger bands. The RVX fell to 18.66, and is inside the Bollinger bands.
Fibonacci Retracements: The SPX is caught in a very large consolidation pattern and fibs are useless in this area.
Support/Resistance: For the SPX, support is at 2730 and overhead resistance at 3028. The DOW has support at 24800 and overhead resistance at 28399. The RUT has support at 1450 and resistance at 1618.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 52. The Weekly chart has an energy reading of 62, now fully-charged. The Daily chart is showing 34, now in exhaustion from the recent breakout . Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes.
Other Technicals: SPX Stochastics rose to 89, overbought. RUT Stochastics rose to 76, below overbought. The SPX MACD faded above the signal line, showing a break in positive momentum. The SPX is at the upper bollinger band with the range 2839 to 3028. The RUT is outside the bollinger bands with the range 1436 and 1578.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 30SEP 271/272*299/300 Long Iron Condor (8/26) was entered for $.18 debits on both the put and call side. I closed the call spreads (9/5) for $.54 credit and effectively locked in a minimum 50% gross return on this position. We’ll see if another drop lower will afford us a good exit on the put spreads.
I would like to enter a 16OCT Long Condor on Monday; each spread will be $1-wide and will be approximately one standard deviation OTM, based on an EM of +/- 9.892 points into expiry. I will target paying about $.17 apiece for these. Afterhours I show these at about SPY 291/292 and 309/310
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 – I sold the 16AUG $50 puts (6/10) for a $.64 credit and this will help drop my cost basis to $49.36/share after the AUG19 assignment. I sold the 27SEP $50 calls (8/19) for $.62 credit. I have no required actions at this time and the price has nearly rallied right back to my cost basis level.
No other trades at this time.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – The next signal has fired; we’ll see if a re-entry is available;
- RSI(2) CounterTrend – None at this time.
- 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..
The Bear appears to be over. In the near term I expect to see large consolidation swings, which might provide “value” entries for these coins on a dip.
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 301.09, there is a +/-4.724 EM into this coming Friday; this is somewhat larger than last week’s 3.9 EM. The EM targets for this Friday’s close are 305.81 to the upside, and 296.37 to the downside.
The upper weekly EM was taken out again last week. On Thursday I spoke about a re-test of that level (and rejection) to put a trade into play, so I took the 13SEP 302 puts long and eventually sold them for a $9/contract profit, or about a 10% return on capital. Price was very choppy yesterday.
We might have yet another opportunity to fade the EM levels 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 no positions in play at this time:
- MSFT 11OCT 139/140 Debit Call Spread (9/9) entered for $.48 debit and looking for a 50% return.
No other trades at this time.
.
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.