Weekend Edition Newsletter
July 13, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
July Expiration
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Market Commentary
Well, here we go…in the next couple of weeks, we’ll do something that has never been done before. We will actually CUT rates with the markets at all-time highs.
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It’s nearly a certainty based on last week’s Powell testimony in front of Congress. So now it’s just a matter of how much that he will cut to stay in front of the curve. And this “musical chairs” effect is all a downstream effect due to the extraordinary and perhaps “overdone” effects of QE back in 2010 – 2014 that horribly distorted the markets. But markets are “not allowed to fail” these days so there it is.
There is still some element of skepticism with the market which is helping drive it higher.
I continue to maintain that we not try to be Hipster Bear Heroes and try to get in front of it by shorting it. Let’s just do the boring thing and play along with this trend as long as it offers us a ride.
We are just about to fall into the meat of Earnings season, so many of the setups that we look at are off-limits even though they are technically good. Normally during this time we transition over to ETFs for trades.
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:
- I will look to enter the GLD 16AUG debit call spreads on Monday; for more detail see the trade listed in the “Whale” section below as well as today’s video.
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.
- I will look to remove the DIS position this week.
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 Friday with advancers minus decliners showing a modestly strong value of +241, closing not far from the highs of the day.
SPX Market Timer : The Intermediate line has flattened in the Upper Reversal Zone and is still bullish. Both the Intermediate and Near Term lines are clustered again, creating a Strong Bearish Cluster for the second day in a row. This can be a short-term leading signal for a pause.
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 fell to 12.39, inside the Bollinger bands. The RVX fell to 15.11, 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 There is no overhead resistance. 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 51. The Weekly chart has an energy reading of 45, starting to pick up on the uptrend. The Daily chart is showing 40, almost at exhaustion. 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 rose to 83, overbought. The RUT Stochastics rose to 68, mid-scale. The SPX MACD histogram rose above the signal line showing an increase in momentum. The SPX is below the upper Bollinger Bands with support at 2880 and resistance at the upper band at 3026. The RUT is below the upper Bollinger Band with its boundaries at 1517 to 1588.
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 and then look for $15 calls that we can sell in the SEP or later series.
- 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 300.65, there is a +/-3.272 EM into this coming Friday; this is somewhat smaller than last week’s 3.423 EM. The EM targets for this Friday’s close are 303.92 to the upside, and 297.38 to the downside.
Still looking to be more aggressive on a lower EM test that holds, vs. fading the upper EM level.
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:
- WMT 2AUG 112/113 Debit Call Spread (7/8) entered for a $.50 debit and I closed this position for $.75.credit. (7/12) This gave me a net $21/contract profit after commissions which led to a 42% return on capital.
- DIS 2AUG 141/142 Debit Call Spread (7/8) entered for a $.50 debit and will look for 50%.
- PEP 9AUG 133/134 Debit Call Spread (7/12) entered for a $.50 debit and will look for 50%..
I like the GLD 16AUG debit call spreads for Monday; I will discuss this trade entry in today’s video
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.