Daily Newsletter

November 30, 2019

View Doc's New Book

December Expiration

Day(s)

:

Hour(s)

:

Minute(s)

:

Second(s)

Market Commentary

Stocks generally move “to the pain,” which is the direction that causes the most pain the largest cross-section of traders out there. Some believe that the “pain” is still to the upside, which I currently agree with. The CNN fear/greed study shows a decent “goldilocks” value: 

The Fed is out of the way for now, numbers keep being revised to be at least “decent,” and the yield curve is no longer inverted last time I looked. Indices have broken out to the upside from a long slumber. I don’t see anything necessarily blocking a year-end “Santa” rally, barring any exogenous events. The fundamental driver for this market is the “search for yield.” If global investors could find it elsewhere, they would be shoveling money in that direction. Stocks are still the answer until the market lets us know otherwise. 

And there will be a pause coming soon, perhaps as we get into the new year which would approximately coincide with the Weekly chart going into exhaustion. The last weekly rally got quite deep into exhaustion before it faded lower. 

Stocks are expensive. It seems only institutions (or those that got in early) can do income strategies like covered calls any more. There are precious few stocks below $50/share that I feel like owning. I won’t chase the expensive ones higher. To this end, I believe that I’ll have to adopt a Call Diagonal strategy so that we can play anything, using a long ITM call as a stock proxy for 100 shares. These can be notoriously tricky to manage, because they are so susceptible to the ravages of time and volatility crush. By the end of the year I should have a fully-baked diagonal strategy that we can start to implement, which will complement the time spread strategy in this low-vol marketplace. 

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.. 

Please sign up for our free daily crypto report here.

Offensive Actions

Offensive Actions for the next trading day:

  • I’ll look to go long with a vertical debit spread on PYPL Monday morning; see “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.
  • 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

%

%

%

Technical Analysis Section

Market Internals:  Volume was less-than-average Friday, with no market internals available on Friday.

SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still “Bullish.” After a Strong Bearish Cluster for the second day in a row with the two strongest timeframes overbought, we finally saw it as 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 12.62, inside the Bollinger bands. The RVX rose to 15.22 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 1635. 

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 85, overbought. RUT Stochastics rose to 58, mid-scale. The SPX MACD fell above the signal line, showing a decrease in positive momentum. The SPX is at the upper bollinger band with the range 3057 to 3153. The RUT is back inside the bollinger bands with the range 1572 and 1628. The RUT Bollingers are widening now after we pointed out last week that they were starting to squeeze. 

SPX chart

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 314.31 there is a +/-3.869 EM into this coming Friday; this is slightly larger than the 3.385 EM from two weeks ago. The EM targets for this Friday’s close are 318.18 to the upside, and 310.44 to the downside

The price took out the upper weekly EM last week after only two days.

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. 

I will add a 3JAN PYPL $1-wide debit call spread on Monday morning for about a $.50 debit. Afterhours I show the 108/109 strike prices in play for this trade. 

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.