Daily Newsletter
August 28, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
September Expiration
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Market Commentary
The Ten-Year Note continued to plunge, from the October highs of 3.2% to today’s 1.4%. This is going to put an enormous amount of political pressure on the Federal Reserve…not only from Trump, but also the Bond Market. We’re quickly getting to a point where Investors have not been before, and it’s very unsettling. In the eternal search for short-term yield, stock markets crept higher today as dividend-paying large caps might be the safest harbor in the storm.
As we saw from 2008, however, there was no safe harbor when the “unfurling” began. Even Gold got crushed. This is because there is a massive panic to sell all assets and go to cash when true crashes occur.
Hindenburg puts are still expensive right now. The contrarian play would be to the upside even though logic dictates that charts have not been able to break out.
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 new 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 below-average today with advancers minus decliners relatively strong at +331, closing near the highs of the day.
SPX Market Timer : The Intermediate line is now falling above the Lower Reversal Zone and is bearish. No leading signals at this time.
DOW Theory: The SPX is in a long term uptrend, an intermediate uptrend, and a short-term sideways trend. The RUT is in a long-term uptrend, an intermediate sideways trend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term sideways trend.
VIX: The VIX fell to 19.25, inside the Bollinger bands. The RVX fell to 23.20, and is inside the Bollinger bands.
Fibonacci Retracements: The SPX is caught in a very large consolidation pattern and fibs are useless in this area.
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 50, just below fully-charged. The Daily chart is showing 64, 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 flattened at 52, mid-scale. The RUT Stochastics rose to 37, mid-scale. The SPX MACD histogram rose below the signal line showing an increase in momentum. The SPX is above the lower Bollinger Band with support at 2828 and resistance at the upper band at 2961. The RUT is above the lower Bollinger Band with its boundaries at 1446 to 1547. The Bollinger Bands are starting to squeeze together again.
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.
- SPY 30SEP 271/272*299/300 Long Iron Condor (8/26) was entered for $.18 debits on both the put and call side. I will look for a 200% return on either side of the trade. There is about a 14 handle EM to this cycle.
No other trade entries at this time. If the Bear Flag releases I will look to enter put credit spreads.
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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 – Looking for the next signal to go long with single-digit advancers to close the day.
- 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 284.85, there is a +/-7.075 EM into this coming Friday; this is bigger than last week’s 5.874 EM. The EM targets for this Friday’s close are 291.93 to the upside, and 277.78 to the downside.
Not looking to fade levels this week.
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. This was the last of our July longs before the correction kicked in, and most likely will expire OTM this week unless it gets a quick run.
No more entries in the short run until markets go quiet/trending again.
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.