Daily Newsletter
December 3, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
December Expiration
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Market Commentary
Deal or no deal? Trump made it clear this morning while on NATO duty that he’d be willing to postpone a trade deal until after the 2020 election; we saw an immediate premarket push lower that piled onto yesterday’s red candles. When markets flip sentiment (i.e. get bearish) then it seems like bad news piles on top of more bad news. Actually, it’s no different, because bad news comes out during price advances as well, but it’s shaken off or discounted as irrelevant.
Herd behavior is fascinating and has taken me a long time to rationalize. When I first started trading the markets some 20+ years ago, I reacted like everyone else that there were evil forces at work to cause these swings in sentiment. No longer; I realize now that price moves towards “the fear,” and with last week’s rally there was too much to lose to the downside..
Short-Term Outlook: Prices are breaking from a massive consolidation pattern in play 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, and the first weekly trend is playing out in that direction..
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Offensive Actions
Offensive Actions for the next trading day:
- No new trades 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.
- We will look for a bounce to sell our CSCO shares into strength
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 above-average today, with the advancers minus decliners coming in at a weak -230. This number bottomed at -385 not long after the opening bell.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still “Bullish.” We’re now seeing this chart get close to a Weak Bullish Cluster, which might be a leading signal for a quick bounce..
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 sideways trend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term downtrend.
VIX: The VIX rose to 15.96, outside the Bollinger bands. The RVX rose to 19.10 and is outside the Bollinger bands. There has been a pretty extreme bollinger squeeze happening on the VIX and RVX that we’ve pointed out for weeks.
Fibonacci Retracements: The price has bounced at the 23.6% fib of the October swing.
Support/Resistance: For the SPX, support is at 2825 with overhead resistance at 3154. The DOW has support at 25500 and overhead resistance at 28175. The RUT has support at 1450 and resistance around 1635.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 43, but is starting to reflect the very linear trend from late 2018. The Weekly chart has an energy reading of 40, just above exhaustion. The Daily chart is showing 46, recharging. Larger timeframe energies are unfolding on a very big move, which will start with the smallest timeframes.
Other Technicals: SPX Stochastics fell to 78, below overbought. RUT Stochastics rose to 61, mid-scale. The SPX MACD fell below the signal line, showing a decrease in positive momentum. The SPX is above the lower bollinger band with the range 3064 to 3152. The RUT is back inside the bollinger bands with the range 1573 and 1629. The RUT Bollingers are widening now after we pointed out last week that they were starting to squeeze.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 20DEC 296/297*319/320 Long Iron Condor (11/4) was entered for a $.17 debit on the puts and a $.16 debit on the calls. I will look for a 200% return on either side.
No additional positions now. We’ll need to see the SPY price approach the 320 level which is still quite a distance away.
I have the following positions in play:
- SPX 23DEC 3015/3020*3150/3155 Iron Condor (12/3) was entered for a $2.50 credit. I have a $1.80 GTC debit exit order placed.
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.
I’m tracking a 29NOV/27DEC Put Calendar, set up for a $24.55 debit and looking for a 10% return. I would be closing that position (11/25) for a $26.95 debit, or very close to a 10% return. I’ll go live with the next one once we see daily exhaustion again.
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. Looking for the next rally to sell calls against.
- CSCO – My cost basis is now $46.18/share after the latest short call trade and dividend payment. I will look for any kind of a dead cat bounce in the near future to unload CSCO shares into strength. I added a DEC19 $46 short call (11/27) for $.45 credit, which should help buffer any downturn before we get a chance to clear this position. I’m OK with selling this position off/being called out if the price rallies above $46 as that is our current cost basis.
No other trades at this time.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – The long cross has fired and is gone. The next entry would be off of the 21ema.
- RSI(2) CounterTrend – I’ll look for the next setup.
- 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..
BTC and other top-ten coins are once again in a downtrend; could this be the final capitulation after slipping into a Bear almost two years ago?
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 314.31 there is a +/-3.869 EM into this coming Friday; this is slightly larger than the 3.385 EM from two weeks ago. The EM targets for this Friday’s close are 318.18 to the upside, and 310.44 to the downside.
The price blew through the lower weekly EM today; if the price were to climb above that level and re-test it successfully, that might allow a long call entry.
I have no positions in play:
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:
- SLV 20DEC 15.5/16.5 debit call spread (11/18) entered for $.42 debit. I will seek a 50% return.
- BAC 27DEC 33/34 debit call spread (11/25) was entered for $.50 debit. I will seek a 50% return.
- PYPL 3JAN 108/109 debit call spread (12/2) was entered for $.50 debit. I will seek 50%.
No additional trades at this time..
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 the following open positions at this time:
- SPY 21FEB 279 long puts (11/15) entered for $2.21 debit. I will look to clear half of the position on any test of the 200 sma, and the other half upon a 10% haircut in price.