Daily Newsletter
August 22 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
September Expiration
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Market Commentary
The charts are bullish but the market won’t break until there is certainty about what Fed Chair Jerome Powell will do during the near future. And I think that the probabilities are that he will disappoint tomorrow. The guy clearly took the job thinking, “this has got to be easy. Just watch the signals and adjust the rate accordingly.” Well, that same logic has been used by every beginning trader since the dawn of time, and no one gets it right out of the gate. We all learn eventually that markets are IRRATIONAL and I honestly think that Powell doesn’t understand that yet.
So to that end, I think Powell will get it wrong tomorrow, and markets will take him out back and pummel him while he gives his press conference. To be fair, it’s almost an impossible position, but the Fed is always and forever too late. Watch for Powell’s speech at 10am ET but his written version might be released at any time in the previous hour, which will cause ripples of volatility. It’s the greatest show on earth.
I am moving over the next two days and will miss out on the fun tomorrow. I hope to be online by Sunday to produce the Weekend Edition. Enjoy the show.
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:
- No orders for tomorrow.
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
Market Internals: Volume was average today with advancers minus decliners showing a mixed value of -11, closing near the midpoint of the day.
SPX Market Timer : The Intermediate line is rising above the Lower Reversal Zone and is now bullish. No leading signals at this time.
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 16.68, inside the Bollinger bands. The RVX rose to 20.30, and is inside the Bollinger bands.
Fibonacci Retracements: The SPX is showing a deep pullback to the 6.18% fib retracement of the most recent swing, and the price has now bounced back up to about the 50% retracement of the swing down from the previous week.
Support/Resistance: For the SPX, support is at 2730 and overhead resistance at 3028. The DOW has support at 24800 and overhead resistance at 28399. The RUT has support at 1460 and resistance at 1618.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 52. The Weekly chart has an energy reading of 48, just below fully-charged. The Daily chart is showing 67, now MASSIVELY charged up and ready to pop . Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes.
Other Technicals: The SPX Stochastics indicator rose to 50, mid-scale. The RUT Stochastics rose to 36, mid-scale. The SPX MACD histogram rose above the signal line showing an increase in momentum and positive divergence. The SPX is above the lower Bollinger Band with support at 2815 and resistance at the upper band at 3030. The RUT is above the lower Bollinger Band with its boundaries at 1448 to 1589.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 9SEP 276/277*301/302 Long Iron Condor (8/12) was entered for $.17 debits on both the put and call side. I will look for a 200% return on either side of the trade .
The 9SEP SPY cycle had about an 11.8 point EM when we spec’ed this out, it’s well within the potential of this chart to hit it.
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.
- CSCO – I sold the 16AUG $50 puts (6/10) for a $.64 credit and this will help drop my cost basis to $49.36/share after the AUG19 assignment. I sold the 27SEP $50 calls (8/19) for $.62 credit.
Even though this has been a decent pullback, I’d like to stay conservative in the near term and look for something a little deeper before we go back to the well.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking at the next signal;
- RSI(2) CounterTrend – None at this time.
- Daily S&P Advancers – This signal was green on 8/14. I took a long position in the SSO (8/15) for a cost basis of $118.18. I sold half of the position (8/20) at a price of $124,01 which gave me a per-share profit of $5.83 on the SSO, or a 4.9% return. I will keep the last half of the position for either a sale at $130/share or a stop at $118.18.
- Swing – None at this time..
The Bear appears to be over. In the near term I expect to see large consolidation swings, which might provide “value” entries for these coins on a dip.
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 288.85, there is a +/-5.874 EM into this coming Friday; this almost exactly the same as last week’s 5.875 EM. The EM targets for this Friday’s close are 294.72 to the upside, and 282.98 to the downside.
The lower EM got punched out again last week for the second time in a row, but recovered higher to close the week. It might be time for the opposite reaction to occur this week. The price is fairly close to the upper EM now but also in confluence with the 50 day sma, which might act as resistance in the short run.
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:
- MSFT 30AUG 141/142 Debit Call Spread (7/28) entered for a $.50 debit and will look for 50% return.
No more entries in the short run.
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.
If we see a decent bounce back up I might consider reloading. I do think that we might see another wave of selling to come yet.