Daily Market Newsletter
April 27, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
May Expiration
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Market Commentary
Momentum, Momentum, Momentum. Same as it ever was. Don’t try to be fancy, don’t fade the momentum, just find ways to put yourself in line with this tailwind. I doubt that we’ll see the price view the 2018 highs as a wall of resistance.
Strategies to play? We should be looking for pullbacks to sell puts against assets that we want. We should be looking for momentum breakouts. Nothing else will work in this environment.
The majority of S&P earnings will be played out by next week.
Earnings Updates – the following companies of note will be reporting over the next few days:
- Monday: GOOGL, WDC
- Tuesday: AAPL, AMD, GE, MA, MCD, PFE
- Wednesday: MRO, 331 others
- Thursday: UA, X
- Friday: No standouts
Here are the big earnings of note left to go this cycle:
- GOOGL: April 29
- AAPL: April 30
Subscriber Update: I will be out of the country and not producing the report from Monday May 20th until Thursday June 6th; in my stead will be a very talented guy by the name of Alex who has started to do some guest videos (below) so that you get used to his voice and style.
Please sign up for our free daily crypto report here.
Here is Alex’s weekend update. This segment helps you look at your portfolio and risk through a slightly different lens. Enjoy!!
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 set up a long call spread on SBUX on Monday; see the “Whale” 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.
- 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 average Friday and breadth ended the day fairly strong with +265 advancers minus decliners.
SPX Market Timer : The Intermediate line flattened in the Upper Reversal Zone, now showing a bullish bias. This index is showing a full bearish cluster now, with all timeframes overbought. This has been 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 uptrend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX fell to 12.73, inside the bollinger bands. The RVX fell to 16.12 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 on the latest pullback. 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. All indices that we track recently showed 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 as the Dow ,S&P500, and /NQ have now printed a Golden Cross. Only the Russell 2000 remains in a death cross and it will signal a Golden Cross within days.
Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 56, yet is starting to reflect the reversion to the larger uptrend again. The Weekly chart has an energy reading of 34, in exhaustion from the uptrend but recharging quickly. The Daily chart is showing a level of 49 which is reflection a reduction from this week’s breakout. These readings say that we should expect maybe one more week of choppy price behavior but will see sharp moves during this chop.
Other Technicals: The SPX Stochastics indicator flattened at 84, overbought. The RUT Stochastics indicator fell to 65, mid-scale. SPX MACD histogram rose above the signal line, showing a return of upside momentum with negative divergence. The SPX is inside the Bollinger Bands with Bollinger Band support at 2846 and resistance at the upper band at 2946 with price is at the upper band. The RUT is inside the Bollinger Bands with its boundaries at 1545 to 1599 and price is below the upper band.
Position Management – NonDirectional Trades
I have the following position 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. I will look for a 200% return on either side as a closing order GTC. We’ll see if the price runs to an 8 point EM by mid-May, last week was good for 3.4 points of that alone.
I’m not in favor of setting up HP Iron Condors in this environment as we don’t have much IV edge these days.
I have the following positions in play:
- SPX 10MAY 2860/2865*2950/2955 Iron Condor (4/15) entered for $2.50 credit. My goal is to secure a 25% return on risk. As long as the price continues to coil in this area underneath the all-time highs, I think that the odds are very good for a target profit return.
No additional trades at this time.
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.
- PFE 17MAY $39 puts (3/18) sold for $.39 credit. It would be a good idea to clear this one prior to 4/30 earnings, but the recent crash in XLV has made this impossible and I will have to hold onto this one through earnings next week.
No additional trades at this time. We need to be patient to wait on the next pullback. We are “green light” again because the death cross has cleared on most of the indices that we track.
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 – Per Tuesday’s advisory 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. I will look for 100% return on this trade.
Crypto has had relative strength over the last few weeks and no one believes this rally. The Bear appears to be over and I’m looking for one last shake-out to signal this.
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 293.41, there is a +/-3.775 EM into this coming Friday; this is slightly larger than last week’s 3.268 EM. The EM targets for this Friday’s close are 297.19 to the upside, and 289.64 to the downside.
Last week’s upper EM was tagged with about one minute left in the trading session on Friday.
A test of the lower EM should be a signal to fade that test to the upside. Upside EM fades might continue to be difficult or be blown through as long as the market is in accumulation mode.
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 at this time:
- TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit. We will look for a 50% return on this trade. Earnings have already passed for TGT, but this one took it on the chin the other day as AMZN announced one-day delivery.
I will play the 31MAY SBUX $1-wide ATM call spreads on Monday for as close to $.50 debit as possible.
Several candidates look really good but we are too close to earnings to take them.
We are also keeping an eye on the Momentum stocks in this section.
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.