Weekend Newsletter
June 15, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
June Expiration
Day(s)
:
Hour(s)
:
Minute(s)
:
Second(s)
Market Commentary
Here comes another Fed Week; this is one of the lightweight “non-quarterly” meetings, where nothing in expected to change, however there is still a twenty-three percent chance that the Fed might cut rates this meeting. As it stands now, Fed Funds Futures are only pricing in a 1% chance that the Fed will NOT cut rates between now and December:
Retail Sales was reported on Friday and came in at +.5% M/M, slightly below the consensus number of .7%, and further strengthening the case for shaving rates. Pressure is also coming from Trump to cut rates, as he sees the Market as a political tool to justify re-election. I’ve gone over this point repeatedly in recent months; we have “socialized” the market as almost a public utility that we all expect to be there, just as we do with water and electricity. No one has tolerance for a 10% correction any more (Can’t they DO something?!!!) and anyone that wants to be re-elected or elected period needs to support it. And support it they will with policy tools, until it’s too late.
Markets are still somewhat skeptical in light of the recent 7% haircut that so far has proved to be nothing more than a normal haircut.
Think about that; a level of “38” right after a 182 point/6.7% rally in seven days, still showing fear with the price right at the highs. This to me looks like the same exact scenario that we had three years ago in July 2016, the price rammed up against the highs with nowhere to go….until Brexit shook the market loose from its funk.
With the amount of energy coiled into these charts, all that we’re lacking is a catalyst to generate excessive pessimism; one step back leads to two steps forward.
Short-Term Outlook: I’m left to conclude that after some short-term histrionics, which should include some form of “scary higher low,” we’ll ultimately see the market continue higher. 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:
- I still have a GTC order for short calls on SLV by selling the 19JUL $15 calls; see “stocks” section below.
- I will add a 15JUL SPY Long Condor on Monday per the “HP Non-Directional” 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
%
%
%
Technical Analysis Section
Market Internals: Volume was below-average Friday with advancers versus decliners showing a mixed level of -67, after a low-water mark of -222 earlier in the day.
SPX Market Timer : The Intermediate line has turned up above the Lower Reversal Zone and is now bullish. No leading signals at this time.
DOW Theory: The SPX is in a long term uptrend, an intermediate trend, 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 15.28, inside the Bollinger bands. The RVX fell to 18.62, and is inside the Bollinger bands.
Fibonacci Retracements: We have seen a full 38.2% retracement of the Christmas Eve rally, and now the price has exceeded the 61.8% fib of the May distribution sell-off. .
Support/Resistance: For the SPX, support is at 2730 and resistance at 2954. The DOW has support at 24800 and resistance at 26700. The RUT has support at 1460 and resistance at 1618.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 55. The Weekly chart has an energy reading of 56. The Daily chart is at exhaustion from this recent uptrend with a reading of 34. Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes, but the daily chart needs a rest from the recent bounce.
Other Technicals: The SPX Stochastics indicator rose to 68, mid-scale. The RUT Stochastics rose to 62, mid-scale. The SPX MACD histogram fell slightly above the signal line showing a retreat in momentum. The SPX is below the upper Bollinger Bands with support at 2748 and resistance at the upper band at 2924. The RUT remains below the upper Bollinger Bands with its boundaries at 1470 to 1552.
Position Management – NonDirectional Trades
I have no remaining positions in play.
I’m going to front-run what I believe will be the next burst of volatility. I don’t have enough energy on the Daily chart yet, but recent experience shows me that when I wait for it, it’s too late and the price will move without me on board.
On Monday morning I will add the following trade:
- 15JUL SPY Long Iron Condor using $1-wide debit spreads costing about $.17-$.18 on each side. I will discuss how to enter this position in today’s video.
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. There is simply too much weekly chart energy to believe that we’ll see neutral price action in the near future.
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.
- CSCO – I sold the 16AUG $50 puts (6/10) for a $.64 credit. I will look to close this one for $.05 to $.10 debit.
We’ll see if any subsequent pullbacks allow better entries.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking at the next signal; I would like to see a pullback first closer to the 21ema. I would focus on the 12JUL SPY series at this time with a $1-wide call spread shooting for around $.50 debit.
- 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 – None at this time..
Crypto “top ten” coins have been positive since early April, although the rally has lost steam lately with the larger timeframes needing a rest. Bitcoin continues to be viewed as a long-term store of value. Litecoin is coming up on a halvening event, which has been pushing price higher due to scarcity.
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 289.26, there is a +/-4.544 EM into this coming Friday; this is similar to last week’s 4.711 EM. The EM targets for this Friday’s close are 293.80 to the upside, and 284.72 to the downside.
I would be a buyer of a successful test of the lower EM this week with an ITM front day/week call option.
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:
- WMT 12JUL 107/108 debit call spread (6/10) entered for $.50 debit; I will look for a 50% return on this trade.
Nothing else is ready to trade at this point due to exhaustion from the recent rally.
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.