Daily Newsletter
July 9, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
July Expiration
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Market Commentary
The market dodged a potential “Fed” bullet today as Jerome Powell decided not to editorialize any recent Fed discussions during his speech at the Boston Federal Reserve meeting on “stress tests.” Instead, much will come down to tomorrow’s appearance at the House Financial Services committee. Chaired by Maxine Waters, anything could happen during this testimony. Normally the Chairman reads a prepared speech, which is released to the press moments before the opening remarks. This speech is immediately parsed/scanned for specific keywords and algorithms are programmed to trade based on the combinations of keywords seen, far faster than any human can. What this means to us mere mortals is that volatility increases in the minutes after the release, but rarely does a new trend actually begin unless the Fed Chairman really has to get something off his/her chest.
We have come so far in the past 13 years; I’ll never forget Bernanke torpedoing the broader market with his first congressional testimony, simply because he was too transparent. The Market was not used to that, and he defended it later, stating that “markets were not his concern.” It used to be that rate policy and employment were the only mandates for the Fed, now they get to be the protectors of the Stock market, mostly due to the direction chosen by Bernanke after the Financial Crisis. The ultimate “kick the can down the road, someone else can deal with it.”
I expect to see some volatility tomorrow, after which we can get back to business once that risk clears. Thursday in front of the Senate is always a nothingburger.
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 trades 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 showing a mixed value of -29, after fading a weak opening print of -344.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still bullish. No leading signals at this time.
DOW Theory: The SPX is in a long term uptrend, an intermediate trend, 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 14.10, inside the Bollinger bands. The RVX rose to 17.02, and is inside the Bollinger bands.
Fibonacci Retracements: Fibs are out of play now with the price near all-time highs.
Support/Resistance: For the SPX, support is at 2730 and resistance at about 3000. The DOW has support at 24800 and resistance at 27000. 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 47, starting to pick up on the uptrend. The Daily chart is showing 48, recharging quickly. Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes, but the daily chart needs a rest from the recent bounce.
Other Technicals: The SPX Stochastics indicator flattened at 74, below overbought. The RUT Stochastics flattened at 56, mid-scale. The SPX MACD histogram fell above the signal line showing a decrease in momentum. The SPX is below the upper Bollinger Bands with support at 2863 and resistance at the upper band at 3007. The RUT is below the upper Bollinger Band with its boundaries at 1508 to 1585.
Position Management – NonDirectional Trades
I have no positions in play at this time.
I will consider the Long Iron Condor strategy when all three timeframes are wound up again. We are very close to this.
I have no positions in play:
I believe we’ll see a very choppy summer period and might try to take advantage of Weekly Short Iron Condors when we get the right signals.
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 SLV 19JUL $15 calls (6/20) for $.15 credit. My plan is to let these calls expire on the 19th.
- CSCO – I sold the 16AUG $50 puts (6/10) for a $.64 credit. I will look to close this one for $.05 to $.10 debit.
We’ll see if any subsequent pullbacks in the short term allow better entries.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking at the next signal; I would like to see a pullback first closer to the 21ema.
- RSI(2) CounterTrend – None at this time.
- Daily S&P Advancers – Looking for the next signal to go long when we have single-digit advancers on the ADSPD.
- Swing – None at this time..
Crypto “top ten” coins have been positive since early April, and Bitcoin has gone parabolic above $10k again. 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 298.46, there is a +/-3.423 EM into this coming Friday; this is somewhat smaller than last week’s 5.265 EM. The EM targets for this Friday’s close are 301.88 to the upside, and 295.04 to the downside.
The price blew through the upper EM last week, well before Friday’s expiration, even though it was a short week. With the strong trend, it’s safer to look to fade the lower EM level 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:
- SBUX 26JUL 85/86 Debit Call Spread (7/1) entered for $.50 debit and closed (7/8) for a $.70 credit. This gave me a net profit/contract of $16/contract after commissions, which was a net 32% return on capital.
- WMT 2AUG 112/113 Debit Call Spread (7/8) entered for a $.50 debit and will look for 50%.
- DIS 2AUG 141/142 Debit Call Spread (7/8) entered for a $.50 debit and will look for 50%..
No additional entries for now.
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 positions at this time.