Daily Market Newsletter
March 25, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
April Expiration
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Market Commentary
The Ten Year Note (TNX) continues to plummet, now just above 2.4% from last fall’s high at 3.248%…and the probability of a rate cut in December has risen to 41% with no probability of a rate hike the rest of this year. Markets are pricing in weakness going forward; so why isn’t the stock market selling off?
Because a falling rate environment forces money into risk assets again in the eternal search for yield. This is going to be a very choppy year and thus far, we are just seeing a repeat of the 2015-2016 horizontal Bear. Oddly, the Russell 2000 rallied today.
Remember “tops are a process” and it might take some time before price really releases in one direction or another.
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An embedded flash video is available here. If you use this feature and cannot view the video above, please inform me ASAP as I plan to kill it going forward unless I hear otherwise.
Offensive Actions
Offensive Actions for the next trading day:
- No new trades 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 wasabove-average today and breadth ended the day mixed at +23 advancers minus decliners.
SPX Market Timer : The Intermediate line fell to the lower limit of the Upper Reversal Zone, still showing a bullish bias. A weak bullish cluster is showing on the two weaker timeframes, this is a leading signal for a bounce.
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 downtrend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term downtrend.
VIX: The VIX fell to 16.33 after peaking at 50.3 a year ago, inside the bollinger bands. The RVX fell to 20.16 and is inside the bollinger bands.
Fibonacci Retracements: The price has moved through several important Fib levels and is not caring about any confluence levels that these present. The recent retracement did not even get to the 23.6% fib retracement. We’ll see if fibs start to matter again.
Support/Resistance: For the SPX, support is at 2700 … with overhead resistance at 2941. The RUT has support at RUT 1500 with overhead resistance at 1600 and 1742. The S&P500, Russell 2000, Dow, and Nasdaq 100 have all printed 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.
Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 59. The Weekly chart has an energy reading of 28, in exhaustion from the uptrend. The Daily chart is showing a level of 40 which is just above exhaustion.
Other Technicals: The SPX Stochastics indicator rose to 79, below overbought. The RUT Stochastics indicator rose to 54, mid-scale. SPX MACD histogram fell below the signal line, showing a loss of upside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2746 and resistance at the upper band at 2852 with price is below the upper band. The RUT is back inside the Bollinger Bands with its boundaries at 1507 to 1598 and price is below the lower band. The price is starting to release after the recent Bollinger Band squeeze.
Position Management – NonDirectional Trades
I have the following positions in play:
- SPY 27MAR 271/272*287/288 Long Iron Condor (2/25) entered for $.18 debit on the call spreads and $.16 debit on the put spreads. I will look for a 200% return on each side individually and may the best side win.
No additional trades for now.
I have the following positions in play:
- SPX 2725/2730*2860/2865 Iron Condor (3/25) entered for $2.60 credit per this weekend’s advisory. My goal is to remove this trade for a 25% return on risk. This would be a closing debit of $2.00 or less.
We are using this newfound vol to sell into as we anticipate a couple of weeks of difficult chop.
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I have no current positions:
Calendar spreads are good for markets in quiet/trending character, but not sideways/volatile which might be coming next. If the market reverts back to quiet/trending, then I’ll look to continue this method.
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 currently have the SLV 18APR $15.5 calls (2/11) for a $.17 credit.
- EBAY 26APR $34 puts (3/11) sold for $.73 credit. I will look to remove this trade for a $.10 debit.
- PFE 17MAY $39 puts (3/18) sold for $.39 credit.
No additional trades at this time.
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 have no positions at this time.
Crypto has had relative strength over the last few weeks and no one believes this rally.
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 279.25, there is a +/-5.268 EM into this coming Friday; this is significantly larger than last week’s 3.382 EM. The EM targets for this Friday’s close are 284.52 to the upside, and 273.98 to the downside.
So far, not much of an attack on either EM limit.
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:
- UPS 29MAR 112/113 Debit Call Spread (3/4) entered for $.50 debit. This one got run through by FDX’s outlook.
- PYPL 26APR 101/102 Debit Call Spread (3/18) entered for $.50 debit. I closed this position (3/25) for a $.60 credit, giving me a $6/contract profit after commissions, or a 12% return on capital.
I think last Friday’s reaction was a warning to step back from longs for a bit.
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. I cleared out the most recent set of puts on the drop to the 200ma back in October. I will “reload” again soon, if/when the weekly chart goes into upside exhaustion. The three-month puts are coming down in price closer to what I’d prefer to pay. (3 months out/90% of current value)