Daily Newsletter
February 3, 2020Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
February Expiration
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Market Commentary
A nice pop to the upside early this morning but it did not sustain the day as sellers chewed into those gains by the closing bell. GOOGL reported afterhours and the actual earnings were well above forecast but they might be guiding lower moving forward. The net today was a lot of range and price movement intraday but very little to show for it on a net basis.
We’ll see if the market catches a cold from GOOGL’s results. That’s pretty much it for the headliners for earnings season….now the market’s on its own.
The following stocks are reporting earnings over the next few days:
- Tuesday: COP, DIS, F, SNAP, SIRI
- Wednesday: GM, HUM, MET, MRK, QCOM
- Thursday: TWTR, UBER, YUM
- Friday: ABBV
- Monday: Small Caps
Subscriber Update: I will be “grandfathering” OptionsLinebacker and DocsTradingTools customers over to a new advisory service, targeting the February timeframe. I intend to make this service more “actionable” with more trade alerts, and plan to include guest contributors who are experts in their specific strategies. If there are any elements of the OLD (existing) service that you want to make sure are carried into the new service, please let me know by dropping me at line at doc@docstradingtools.com
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. The first weekly trend from that consolidation is already into exhaustion and looks to be ready to consolidate.
Please sign up for our free daily crypto report here.
Offensive Actions
Offensive Actions for the next trading day:
- No new positions 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 above-average today, with the advancers minus decliners showing a relatively strong value of +.
SPX Market Timer : The Intermediate line has fallen below the Upper Reversal Zone and is now “bearishl” No leading signals at this time but it is close to a weak bullish cluster again.
DOW Theory: The SPX is in a long term uptrend, an intermediate downtrend, and a short-term downtrend. The RUT is in a long-term uptrend, an intermediate downtrend, and a short-term downtrend. The Dow is in an intermediate downtrend and short-term downtrend.
VIX: The VIX fell to 17.97, back inside the Bollinger bands. The RVX fell to 19.78and is inside the Bollinger bands.
Fibonacci Retracements: The SPX has come down to test the 23.6% fib retracement of the entire October- January swing, and is above the 50% fib retracement of the latest swing higher since December.
Support/Resistance: For the SPX, support is at 3070 with overhead resistance at 3338. The DOW has support at 27325 and overhead resistance at 29374. The RUT has support at 1580 and resistance around 1715.
Fractal Energies: The major timeframe (Monthly) is into exhaustion now at a value of 33, and is starting to reflect energy bleed from the very linear trend from late 2018. The Weekly chart has an energy reading of 38, rising from exhaustion and recharging quickly due to the last three weeks of non-linear action. The Daily chart is showing 50, recharging quickly but also starting to reflect the flip in polarity to the downside trend on Friday. We were seeing a runaway bull once again but now both parent charts into exhaustion. Very few daily trends continue when the energy level is at 25 or lower.
Other Technicals: SPX Stochastics fell to 55, mid-scale. RUT Stochastics fell to 35, 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 3218 to 3342. The RUT is above the lower bollinger band with the range 1622 and 1708.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 21FEB 323/324*337/338 long condor (1/21) entered for $.50 debit. I will seek a 25% return on the trade. At the time of entry, the price of the SPY was 331.4 with a +/- 9.93 move into the 21FEB EM.
No additional trades at this time.
We are not in a good mode for the traditional “High Probability” short iron condors since the price movement has been incredibly directional, and the Implied Vol is reflective of this with a very low/complacent value. Not good odds to sell options right now, better odds to buy them and go “long gamma.”
I have the following positions in play:
- SPX 28FEB 3150/3155*3320/3325 LP Iron Condor was entered for $2.55 credit (2/3) and will look for a 25% return on risk.
I have the following positions.
- SPY 18FEB/20MAR 324 Put Calendar (2/3) was entered for a $3.23 debit. I will look for a 10% return.
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.
We’ll look for the next pullback to potentially sell puts against our next candidate.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Awaiting the next signal.
- 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; stay tuned for this signal to show in the near future.
- Swing – I have no positions in play:
BTC and other top-ten coins have been breaking higher over the last week. Not sure at this point whether the gains will hold, or whether this will just turn the advance into another Weekly “lower high.”
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 321.73 there is a +/-7.959 EM into this coming Friday; this is much larger than the 5.266 EM from last week. The EM targets for this Friday’s close are 329.69 to the upside, and 313.77 to the downside.
Volatility is increasing. EM fades are going to be difficult in this vol.
I have the following positions in play:
- SPY 21FEB 319/320 debit put spread (1/22) entered for $.11 debit. I am looking for a $.44 exit from this trade.
I tried to add another bearish debit put spread last week but the big Monday gap down invalidated it. With bearish trades you have to be IN before the move, not during nor after it.
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:
- WMT 24JAN 121/122 debit call spread (12/16) was entered for $.50 debit and expired OTM.
No further trades at this time. I think that the Weekly swing is over for now, or presents very poor reward/risk characteristics for us to take additional longs, unless they are non-correlated to the markets.
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.
Unless we see another rally leg into the end of January, we’re too late to double up on our position. .
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.