Daily Newsletter
October 5, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
October Expiration
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Market Commentary
In Thursday’s report I talked about the tightrope that markets were walking between maintaining momentum/growth, in concert with Fed rate policy. We pretty much saw a “Goldilocks” event on Friday with the Jobs report; it wasn’t a blow-out which would call question into keeping rates low/lower, nor was it a “miss” to increase doubt. In addition, the unemployment rate dropped to a 50 year low, and participation rate increased. Overall, a pretty balanced report.
Interest rates continued to plummet and the ten year note is now paying about 1.5%. Say goodbye to savings. I continue to believe that the only game in town is with stocks, especially those paying a dividend over the ten-year. We have another “minor” Fed meeting in three weeks, and the probability for a rate cut at that event is now over 76%. The USA continues to be the best block in a bad global neighborhood.
My continued belief is that this low-rate business will continue to push money into equities regardless of fundamentals, perhaps into a final upside blow-off. How far it goes, and what awaits us on the other side of that should not be our concern at this moment. Far too many have been conditioned by the mainstream press into worrying about things that are beyond the horizon, which is why the negativity and pessimism is so high right now, further increasing the odds of a large move.
But that theory notwithstanding, THIS is the move that will tell us what’s next. By mid-month I think we’ll have much more clarity to the eventual outcome of this huge pending move that we’ve been sitting on for the better part of a year.
Bank earnings kick off the 3Q2019 reporting season on Tuesday, October 15. We have a relatively light reporting week ahead of us other than Jerome Powell speaking three times.
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 COST debit call spread on Monday; 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.
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
Position Management – NonDirectional Trades
I have no positions in play:
This is not the right character of market for this strategy at this point.
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 SEP $17.50 calls (8/13) for $.18 credit and closed down this position (9/5) for a $.44 debit. I will let this price chart trend as much as it wants to in the near future before writing against it again.
- CSCO – My cost basis is now $48.80/share prior to the latest trade. I sold the JAN20 $50 calls for $1.94/contract so our cost basis could be as low as $46.86 depending on the outcome of those JAN calls.. I don’t want to see this trade below $46/share on a closing basis.
No other trades at this time.
Position Management – Directional Trades
Crypto got absolutely hammered last week and is testing to see how low that it can probe; support seems to be around $8k on bitcoin and $6500 below that.
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 294.35, there is a +/-5.442 EM into this coming Friday; this is about the same as last week’s 5.551 EM. The EM targets for this Friday’s close are 299.79 to the upside, and 288.91 to the downside.
The price obliterated the lower Weekly EM this week. I did not pursue the fade trade on Friday due to being out for surgery. (whoever designed the knee…..) Once again I would be more interested in fading the lower EM level going forward although we might not get that opportunity.
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 no positions in play at this time:
- MSFT 11OCT 139/140 Debit Call Spread (9/9) entered for $.48 debit and looking for a 50% return. We have to close this trade this week on any kind of positive return that we can secure.
- WMT 25OCT 118/119 Debit Call Spread (9/23) entered for $.50 debit and looking for a 50% return.
I will enter the 15NOV COST ATM debit call spreads on Monday. These are $5 spreads so we’ll have to back down the position size correspondingly, seeking a max $2.50 debit.
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 open positions at this time. Skew is making OTM puts really expensive now.
If we see a decent bounce back up I might consider reloading.