Daily Market Newsletter

May 7, 2019

Non-Directional Strategies

Semi-Directional Strategies

Directional Strategies

Bitcoin/Crypto

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Market Commentary

How quickly things change, and the timing was perfect. Just when everything looked to be “coast is clear” after Friday’s Jobs report, Trade Wars part XXII comes along and revs up the fear again. Ironically, you can see that we went through the same exact thing a year ago, according to the Fear/Greed index, and that was right before what was to be the summer rally:.

This pullback is actually quite shallow/mild right now, so I’d like to see if we can shoot for something a little deeper before we sell any puts.

We are finally past the bulk of earnings so we have “open season” on long plays right now. We’re good for about two months, until early July when the next round starts.

Strategies to play? We should be looking for pullbacks to sell puts against assets that we want. We should be looking for momentum breakouts. Nothing else will work in this environment. I want to give this pullback a little more room before we attack it, even at the risk of missing it.

Subscriber Update: I will be out of the country and not producing the report from Monday May 20th until Thursday June 6th; in my stead will be Alex who has started to do some guest videos (below) so that you get used to his voice and style.

Please sign up for our free daily crypto report here.

I’ll retain Alex’s weekend update for a few days. This segment helps you look at your portfolio and risk through a slightly different lens. Enjoy!!

Offensive Actions

Offensive Actions for the next trading day:

I will set up the next series of short calls on SLV by selling the 19JUL $15 calls; see “stocks” section below. I will keep this as an open order.

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 well above-average today and breadth ended the day extremely weak with -432 minus decliners. The low-water mark this morning was -474 advancers minus decliners.

SPX Market Timer : The Intermediate line fell from the Upper Reversal Zone, now showing a neutral bias. No leading signals at this time..

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

VIX: The VIX rose to 19.32, outside the bollinger bands. The RVX rose to 22.03 and is outside the bollinger bands.

Fibonacci Retracements: The price has pulled down to the 38.2% retracement of the March/April swing.

Support/Resistance: For the SPX, support is at 2700 … with overhead resistance at 2954. The RUT has support at RUT 1500 with overhead resistance at 1600 and 1742. All indices that we track recently showed a Death Cross with the 50ma crossing below the 200ma; this can be a leading signal for a true Bearish move. It can also signal “false” and create a massive swing higher. We might be seeing the latter scenario as the Dow ,S&P500, and /NQ have now printed a Golden Cross. Only the Russell 2000 remains in a death cross and it will signal a Golden Cross within days.

Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 53, yet is starting to reflect the reversion to the larger uptrend again. The Weekly chart has an energy reading of 40, just above exhaustion from the uptrend. The Daily chart is showing a level of 54 which is fully-charged again but starting to reflect the energy draw from the move down. These readings say that we should expect maybe one more week of choppy price behavior but will see sharp moves during this chop.

Other Technicals: The SPX Stochastics indicator fell to 76, below overbought. The RUT Stochastics indicator rose to 71, mid-scale. SPX MACD histogram fell below the signal line, showing a loss of upside momentum after negative divergence. The SPX is inside the Bollinger Bands with Bollinger Band support at 2874 and resistance at the upper band at 2957 with price is above the lower band. The RUT is inside the Bollinger Bands with its boundaries at 1554 to 1612 and price is above the lower band.

Position Management – NonDirectional Trades

I have the following position in play:

SPY 17MAY 282.5/283.5*297/298 Long Iron Condor (4/22) entered for $.16 on the put side and $.17 on the calls. I will look for a 200% return on either side as a closing order GTC. We’ll see if the price runs to an 8 point EM by mid-May.

If we see a little further pull to the downside, we might want to consider setting up a HP put credit spread.

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.

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.

No additional trades at this time. We need to be patient to wait on the next pullback. We are “green light” again because the death cross has cleared on most of the indices that we track.

Position Management – Directional Trades

Thoughts on current swing strategies:

8/21 EMA Crossover – Looking for the next signal.
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 – I set up a long swing trade on the Russell 2000 via the IWM (4/24), with a 24MAY IWM 163/164 debit call spread (4/24) for $.20 debit. I will look for 100% return on this trade. Friday’s breakout almost put this one within reach of the target.

Crypto has had relative strength over the last few weeks and no one believes this rally. The Bear appears to be over and I’m looking for one last shake-out to signal this.

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 Thursday’s close at SPY 294.03, there is a +/-3.477 EM into this coming Friday; this is slightly smaller than last week’s 3.775 EM. The EM targets for this Friday’s close are 297.5 to the upside, and 290.55 to the downside.

The lower EM was taken out this week on the news about trade deals and the fade is off the table.

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:

TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit. We will look for a 50% return on this trade. Earnings have already passed for TGT, but this one took it on the chin the other day as AMZN announced one-day delivery.
SBUX 31MAY 77/78 debit call spread (4/29) entered for $.48 debit. I will look for a 50% return.
MCD 7JUN 197.5/200 debit call spread (5/6) entered for $1.14 debit. I will look for a 50% return.

We are also keeping an eye on the Momentum stocks in this section. Most of those are a little extended at this point and this pullback might do the rest of the market a lot of good.

No other entries at this point.

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.