Daily Newsletter
November 27, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
December Expiration
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Market Commentary
A very bullish holiday week so far, with only a half-day left on Friday as the cash markets will close at about 1pm ET. We used to get a sense of how the holiday retail season would go after a few hours of Black Friday sales have been reported, but of course all of those data points have been backed up to the weeks prior due to the much better radar that we have now.
This rally will quickly turn into yet another “most hated” rallies in history because we’ve recently had so many 1) recession warnings, 2) slowing numbers, and 3) scary-sounding events. Listening to the mainstream news will get you nothing but on the wrong side of price.
Chasing this rally might be a poor idea; we’ll see if we can find an idling sector this weekend. Don’t forget, tomorrow is Thanksgiving & a market holiday, so no newsletter tomorrow.
Short-Term Outlook: Prices are breaking from a massive consolidation pattern in play 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, and the first weekly swing is playing out in that direction..
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Offensive Actions
Offensive Actions for the next trading day:
- No trade entries for Friday.
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.
- We will look for a bounce to sell our CSCO shares into strength
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 less-than-average today, with advancers minus decliners showing a decent value of +218 at the closing bell.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still “Bullish.” Back to the Strong Bearish Cluster again for the second day in a row with the two strongest timeframes overbought. This is 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 sideways trend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX rose to 11.75, inside the Bollinger bands. The RVX fell to 14.91 and is inside the Bollinger bands. There is a pretty extreme bollinger squeeze happening on the VIX and RVX.
Fibonacci Retracements: The price is back to the highs and fibs are not in play.
Support/Resistance: For the SPX, support is at 2825 with no overhead resistance. The DOW has support at 25500 and no overhead resistance. The RUT has support at 1450 and resistance around 1608.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 47. The Weekly chart has an energy reading of 41, starting to reflect the recent breakout. The Daily chart is showing 42, starting to use up the recent energy store. Larger timeframe energies are unfolding on a very big move, which will start with the smallest timeframes.
Other Technicals: SPX Stochastics rose to 84, overbought. RUT Stochastics rose to 55, mid-scale. The SPX MACD rose above the signal line, showing an increase in positive momentum. The SPX is at the upper bollinger band with the range 3046 to 3153. The RUT is outside the bollinger bands with the range 1567 and 1627. The RUT Bollingers are widening now after we pointed out last week that they were starting to squeeze.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 20DEC 296/297*319/320 Long Iron Condor (11/4) was entered for a $.17 debit on the puts and a $.16 debit on the calls. I will look for a 200% return on either side.
No additional positions now. We’ll need to see the SPY price approach the 320 level which is still quite a distance away.
I have no positions in play:
No other entries at this time. We’ll need to see the SPX go into severe daily exhaustion again. This trend is too strong to fade for more than a couple of days.
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.
I’m tracking a 29NOV/27DEC Put Calendar, set up for a $24.55 debit and looking for a 10% return. I would be closing that position (11/25) for a $26.95 debit, or very close to a 10% return. I’ll go live with the next one once we see daily exhaustion again.
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. Looking for the next rally to sell calls against.
- CSCO – My cost basis is now $46.18/share after the latest short call trade and dividend payment. I will look for any kind of a dead cat bounce in the near future to unload CSCO shares into strength. I added a DEC19 $46 short call (11/27) for $.45 credit, which should help buffer any downturn before we get a chance to clear this position. I’m OK with selling this position off/being called out if the price rallies above $46 as that is our current cost basis.
No other trades at this time.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – The long cross has fired and is gone. The next entry would be off of the 21ema.
- RSI(2) CounterTrend – I’ll look for the next setup.
- Daily S&P Advancers – Looking for the next signal to go long with single-digit advancers to close the day.
- Swing – None at this time..
BTC and other top-ten coins are once again in a downtrend; could this be the final capitulation after slipping into a Bear almost two years ago?
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 310.96 there is a +/-2.847 EM into this coming Friday; this is smaller than last week’s 3.385 EM, and that’s mostly because we only have 3.5 trading days this upcoming week. The EM targets for this Friday’s close are 313.81 to the upside, and 308.11 to the downside.
The price took out the upper weekly EM this week after only two days. I will not attempt to fade it.
In this market we will continue to seek tests against the lower EM marker and not necessarily stand in front of the upper marker, since the trend has appeared to unfurl to the upside again.
I have no positions in play:
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:
- SLV 20DEC 15.5/16.5 debit call spread (11/18) entered for $.42 debit. I will seek a 50% return.
- BAC 27DEC 33/34 debit call spread (11/25) was entered for $.50 debit. I will seek a 50% return.
No additional entries at this time.
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 the following open positions at this time:
- SPY 21FEB 279 long puts (11/15) entered for $2.21 debit. I will look to clear half of the position on any test of the 200 sma, and the other half upon a 10% haircut in price.