Daily Newsletter
July 20, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
August Expiration
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Market Commentary
After giving the market everything that it wanted last week with decent earnings and telegraphed Fed policy, it appears that storm clouds are on the horizon:
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We had a “goldilocks” market condition just a week ago, and now uncertainty. This could be a combination of the China trade deal (lack of), Iran’s behavior, a “sell the news” attitude with the upcoming rate cut, or perhaps the fact that not all FOMC members see a cut as necessary/likely. I have postulated over the last few weeks that I see a lot of similarities between today’s market, and the one from three years ago. It took a real shock to the system – actually two of them – to break the markets loose in mid-to-late 2016.
It’s not going to be the Fed that does it; more than likely the Fed will stripe one down the middle of the fairway and cut rates one-quarter basis point.
So what to do? We will continue to play momentum stocks to the upside when they set up, and now we’re ready to look for a long condor to take advantage of the next big “surprise” move. Let’s not over-think things by getting tangled in the news. The price is telling us everything we need to know.
This week is the big one for earnings, of note is FB on the 24th, AMZN and GOOGL on the 25th, and then AAPL the week after on the 30th. That pretty much wraps up earnings season (the big boys) after AAPL releases, so we’ll see if markets dive or lift by that point. I typically do not play earnings releases as a strategy; I prefer to look for a trend breaking out after earnings and then riding that as the IV dissipates.
Earnings Reports: The following companies of note report in the next few days:
- Monday: HAL
- Tuesday: KO, LMT, SNAP, TRV, V, UBS
- Wednesday: BA, CAT, F, FB, TSLA
- Thursday: AMZN, GOOGL, INTC
- Friday: MCD, TWTR
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.
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Offensive Actions
Offensive Actions for the next trading day:
- I will enter a SPY 16AUG Long Iron Condor on Monday morning, details below in the HP NonDirectional section below and in today’s video.
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
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Technical Analysis Section
Market Internals: Volume was above-average Friday with advancers minus decliners showing a weak value of -201, closing at the lows of the day.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still bullish. No leading signals at this time.
DOW Theory: The SPX is in a long term uptrend, an intermediate trend, and a short-term downtrend. The RUT is in a long-term uptrend, an intermediate sideways trend, and a short-term sideways trend. The Dow is in an intermediate uptrend and short-term downtrend.
VIX: The VIX rose to 14.45, inside the Bollinger bands. The RVX rose to 16.59, and is inside the Bollinger bands.
Fibonacci Retracements: Fibs are out of play now with the price near all-time highs.
Support/Resistance: For the SPX, support is at 2730 and There is no overhead resistance. The DOW has support at 24800 and no overhead resistance. The RUT has support at 1460 and resistance at 1618.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 51. The Weekly chart has an energy reading of 45, starting to pick up on the uptrend but not into exhaustion. The Daily chart is showing 57, fully-charged and ready to move. Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes.
Other Technicals: The SPX Stochastics indicator flattened at 80, barely overbought. The RUT Stochastics flattened at 50, mid-scale. The SPX MACD histogram fell below the signal line showing a decrease in momentum. The SPX is below the upper Bollinger Bands with support at 2912 and resistance at the upper band at 3033. The RUT is above the lower Bollinger Band with its boundaries at 1524 to 1587.
Position Management – NonDirectional Trades
I have no positions in play at this time.
I’m going to enter the SPY 16AUG Long Condor on Monday morning; the EM is about 9.5 points, or 95+ SPX handles into August expiration. I will look for $1-wide call and put debit spreads that cost about $.17, and will then look for about a 200% return from each side.
I have no positions in play:
I believe we’ll see a very choppy summer period and might try to take advantage of Weekly Short Iron Condors when we get the right signals.
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 SLV 19JUL $15 calls (6/20) for $.15 credit. Per yesterday’s advisory I closed/rolled these options down for $.13 and opened up new SLV 30AUG $16 calls for $.16 credit, or a $.03 net credit on the roll.
- 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 in the short term 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.
- 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..
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 297.17, there is a +/-4.117 EM into this coming Friday; this is somewhat larger than last week’s 3.272 EM. The EM targets for this Friday’s close are 301.29 to the upside, and 293.05 to the downside.
The lower EM is a good fade level as long as the uptrend persists.
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:
- PEP 9AUG 133/134 Debit Call Spread (7/12) entered for a $.50 debit and will look for 50%.
- GLD 16AUG 133/134 Debit Call Spread (7/15) was entered for a $.44 debit and will look for a 50% return. Per Thursday’s advisory I closed this position for a $.63 credit. This gave me a $15/contract profit after commissions, which was a 34% return on capital.
No new entries for Monday.
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.