Daily Market Newsletter

Markets were somewhat humbled today and was driven lower by big Tech, especially AAPL.AMZN and FB. Facebook is interesting as it’s printed a weekly “lower high” and could be heading much lower since a lot of folks got on the wrong side of the tape today. What is odd is that those stocks were sold to move into small cap RUT stocks, as this was the only index rising today.

Keep in mind that a 1% move in the S&P today is barely visible on a daily chart.

The current watchlist that I’m scanning against in thinkorswim is available here.

The latest crypto video (Wallets Part 4) is available here

If the above video does not play, try this version.

Offensive Actions

Offensive Actions for the next trading day:

Weekly EM levels have been set; see “weekly EM” section below.
I have a Whale trade outlined for LOW in the “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.
Management of the SPX calendar spread will be discussed tonight.

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 average today. Breadth was modestly positive with +81 advancers minus decliners.

SPX Market Timer : The Intermediate line flattened in the Upper Reversal Zone, still showing a bullish bias. After the sixth cluster in a row, which was a leading signal for a pause, we finally have seen a small pause in the assault starting late last week.

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 uptrend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term downtrend.

VIX: The VIX rose to 10.21, back inside the bollinger bands. This is after a twenty-year low on the VIX. The RVX rose to 13.34 and is back inside the lower bollinger band.

Fibonacci Retracements: If we see an actual pullback then I’ll start to determine fib levels that might act as potential support.

Support/Resistance: For the SPX, support is at 2430 … with overhead resistance at 2508. The RUT has support at RUT 1350 with overhead resistance at about 1452. All three major index charts that we follow are now showing a Golden Cross with the 50 day moving average crossing above the 200 day average.

Fractal Energies: The major timeframe (Monthly) is now down into exhaustion again with a reading of 35. The Weekly chart is now losing energy with an energy reading of 58, due to the recent trend. The Daily chart is showing a level of 49 which is rapidly recharging. We are seeing the movement that we expected, however with an exhausted monthly chart, I don’t think any breakout will be able to reach its potential.

Other Technicals: The SPX Stochastics indicator flattened at 92, overbought. The RUT Stochastics indicator rose to 94, overbought. The SPX MACD histogram fell above the signal line, showing a loss of upside momentum. The SPX is back inside the Bollinger Bands with Bollinger Band support at 2440 and resistance at the upper band at 2524 and is below the upper band. The RUT is back inside the Bollinger Bands with its boundaries at 1375 to 1463 and price is below the upper band.

We are seeing the market reacting to any fear catalyst right now, and we’ll be watching to see if the price is able to make new highs or not. The overall trend is still higher and short-term energy is building quickly on this non-linear chop.

Position Management – NonDirectional Trades

I have no positions in play; I will wait on the first significant pullback to allow me to secure put spreads below support. We can finally sell positions for SEP below SPY 230 but my sense is that still isn’t worth the risk just yet. A 10% correction would put the price at SPY 224 and we’d want to be well below that level with short puts.

Offense: I still do not want to set up OTM credit spreads in this low-vol environment until we see real movement to the downside. If and when we get this movement we’ll need to identify levels that we want our credit spreads to be “below.” This is the same type of price action that was so perilous to HP condors back in 2013, so let’s not fight it.

If I see price drop to the SPX 2300 level, this might be our first opportunity to sell premium against that level.

I have no positions in play. It makes no sense to pursue an order with this strategy until we see (at the very least) a daily exhaustion signal.

I have the following positions:

SPX 6OCT/3NOV 2500 Put Calendar (9/18) was entered for a $13.05 debit. My action points are $2487 and 2515 as explained in Monday’s video. My GTC exit credit is $14.40. Should the 2515 level be hit in the SPX, I will add the same series SPX 2530 call calendar. My plan is not to do anything on a move lower.

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:

SDS Stock – I still own 100 shares of this stock from 2011 and will continue to write calls against this position with every correction/pullback.
VXX Stock – I own 12 shares of this stock and will hold until Armageddon occurs.
SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level. I sold the NOV $18 calls for $.22
F NOV17 $11 Puts (9/18) were entered for a $.19 credit.
CHK 20OCT $4 puts (9/20) were sold for a $.19 credit.

I would like one more shot at XLF at $22/share. If the price of SLV continues to drop, I will sell the 17NOV $15 SLV puts for a minimum of $.15 credit.

In this weekend’s video I talked more about the weekly NUGT/DUST strategy that I’m starting up.

Position Management – Directional Trades

Thoughts on current swing strategies:

8/21 EMA Crossover – Looking for the next 8/21 ema entry.
RSI(2) CounterTrend – I will continue looking for additional setups as long as markets are trending higher. The only signal showing in recent days was ORCL, and a better signal would be to see it close the gap first.
Daily S&P Advancers – if I see the number of daily S&P500 advancers drop into single digits near the close of any trading day, I will go long shares of the SSO.

This is a new section that I’m starting in the summer of 2017; all Cryptocurrency trades are by definition going to be “directional” trades due to the fact that there are no premium-selling strategies available.

Please refer to the left sidebar section if you’d like to get caught up on “FAQ” -style intro videos.

In the weekend video I discuss the current “box” that the price is in, and should it break (especially to the upside) we should see some very fast price action.

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.”

Here is the most recent video which is “Wallets Part 4.”

Viewing the SPY from the current Friday closing price at 249.44, there is a +/- 2.094 EM into this Friday. This has been a very “normal” EM lately of about 20 SPX points

The EM targets for this Friday’s close is 251.53 to the upside, and 247.35 to the downside.

This appears to be the calm before the storm. I am mostly interested in fading the upper target if hit.

I am relabeling this section the Ratio Butterfly strategy.

Entry criteria are:

Using calls
17 to 50 calendar days
center strike .25 to .40 delta
ratio is 1/3/2 quantity, from the bottom, calls are long/short/long

We will exit the spread at a 60-70% level of credit received. The max risk on the trade is defined on the graph if the price goes much higher. There are no early exits, only exiting the week of expiry to avoid assignment. Also avoid dividend periods.

I am currently trialing some trades and will discuss them in the newsletter; after a few cycles, I will start adding these trades to circulation.

TOS scan code: http://tos.mx/ZsIjgu

I have no positions at this time.

I would like to add a LOW 20OCT 79/80 debit call spread tomorrow, for about a $.50 debit. If the price rises early tomorrow, I might have to take the same spread at 79.5/80.5.

No other trades right now.

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.

Quite honestly, selling the “financing” trades has been a huge challenge in this low-vol environment. I will only sell put spreads on decent pullbacks that allow me to secure put spreads 10% OTM

With a new all-time low VIX, the opportunity to buy inexpensive short deltas was too great, so I added some OCT puts recently.

We currently have the following positions in play with this strategy:

SPY OCT17 222 long puts (7/24) – I entered this position for an $.85 debit. This position was up 50% at one point and the temptation to remove it for a profit was strong, however the point of these trades is to hedge the downside for existing longs, AND try for those home runs on corrections that come out of nowhere.