Daily Market Newsletter
June 5, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
June Expiration
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Market Commentary
Hello all. It is Alex here covering for Doc who is on vacation until the end of the week.
Well, I must say I am a little surprised with the push higher across all of the indices, except the Russel which stayed relatively flat. Given that yesterday’s gains were the single largest one day gains in the last 5 months, coupled with low energy on the daily time frame, I was really expecting an inside day (alas I never got the opportunity to sell a condor on an early morning pullback like I had explained yesterday). The Fed’s dovish tone certainly has given the markets a lift, enough so for the markets to push through their weekly expected move, a counter trend push with low energy levels. Even the news of China slapping fines on Ford and investigating FedEx, both a clear escalation of trade war stances prior to the upcoming G20 summit, it didn’t seem to carry any weight when compared to the further whispers of the Fed’s possible intention to cut interest rates to maintain growth. The ADP jobs report came out today showing a measly 27,000 jobs added as compared to the consensus of 185,000 but that didn’t seem to phase the market either. Investors have been looking for the excuse to buy back in and that is exactly what the fed has given them this week. With the FedWatch tool now showing less than a 2% chance of rates staying flat through to the end of the year, the hopes are all on rate cuts significantly stimulating growth and an associated surge in stock prices.
The fractal energy on the SPX daily chart remained level again today with today’s positive move counteracting the linearity that we had seen in the downward movement of the last week of steady losses. The fractal energy is just above the exhaustion level which means that we still could stay in and around the current price level and chop for some time until it recharges. Pushing through the expected move, combined with low energies has me thinking that price will get rejected at the downward trend line and bounce back down to revisit the expected move.
Cheers
Alex
If you have any questions, please feel free to reach out to me at alex_docs_trading@outlook.com
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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 keep this as an open order.
- No new orders for Monday.
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 today as the markets continued to push higher after yesterday’s stellar day. The advancers versus decliners closed up +211, fading after the open where it had hit a high of 364 shortly after the open.
SPX Market Timer : The Intermediate, momentum and near-term lines have all turned upwards and triggered a long signal yesterday
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 sideways trend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term downtrend. All indices breached their support levels today with the SPX and RUT closing below support
VIX: The VIX contracted another 5% today ending the day at 16.09, inside the Bollinger bands. The RVX decreased 1%, closing at 19.40, and is inside the Bollinger bands.
Fibonacci Retracements: Price is approaching the 38.2% retracement of the rally that kicked off on Boxing day and peaked out in early May.
Support/Resistance: For the SPX, having breached it’s previous support level, opens the 2650 level which is also the 50% Fibonacci level with overhead resistance at 2954. The RUT breached it’s 1500 support level to the upside and leaned up gainst through today’s intraday activity, with overhead resistance at 1617 and 1742.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 53. The Weekly chart has an energy reading of 53. The Daily chart remains at near exhaustion at 39. There is no clear direction where the price action may go based on the fractal energy levels.
Other Technicals: The SPX Stochastics indicator jumped to 45 triggering a crossover long signal point. The RUT Stochastics similarly jumped to 41, having achieved a long signal crossover yesterday. The SPX MACD histogram is trending upwards towards the long signal crossover line and will signal a momentum crossover tomorrow if the market remain in a slight uptrend. The SPX closed inn the middle of the Bollinger Bands with support at 2750 and resistance at the upper band at 2908. The RUT remains above the lower Bollinger Bands with its boundaries at 1460 to 1587.
Position Management – NonDirectional Trades
I have no remaining positions 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. The puts were closed (5/13) for a $.48 credit. This gave us a net $140 profit from the puts alone. The calls expired for a net $95 loss so our return on this trade was a net 27.2% after commissions.
With the S&P500 charts nearly at full energy again across the board, it might be time soon for another long condor.
I have no positions in play at this time.
No additional trades at this time; the timing is absolutely crucial on these trades so we have to find absolutely exhausted conditions prior to taking these entries.
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.
No additional stock plays until I return from travel 2nd week June; I’d like to see if the current pullback plays out a little deeper.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking for the next signal. I don’t like these signals to the short side.
- 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 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. At this point any kind of positive return on this trade would be welcome as I’m running out of time, a shame as this trade was within a penny of firing at my target.
Crypto had a big rally this week, and Bitcoin had a monstrous dump on Friday, effectively shaking off all of the late-to-the-party longs. So far the price action is positive.
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 285.84, there is a +/-5.309 EM into this coming Friday; this is about the same as last week’s 5.539 EM. The EM targets for this Friday’s close are 291.15 to the upside, and 280.53 to the downside.
The lower EM for this week lines up with the low test of last week, so this might be a good level to fade with an ITM call option should it be tested and offer support.
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 remaining positions in play at this time:
- TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit and expired OTM for a net $254 loss on two contracts.
- SBUX 31MAY 77/78 debit call spread (4/29) entered for $.48 debit and closed (5/16) for $.72 credit. This gave me a net profit of $20/contract or 42% net return on capital after commissions. .
- MCD 7JUN 197.5/200 debit call spread (5/6) entered for $1.14 debit and closed (5/17) for $1.57 credit, giving us a net $39/contract profit or a 34.2% return on capital after commissions.
We are also keeping an eye on the Momentum stocks in this section. Most of those are a little extended at this point and this pullback might do the rest of the market a lot of good. I would like to let the market settle first before going heavily long.
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.