Daily Market Newsletter
March 29, 2017Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
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April Expiration
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Market Commentary
Another good economic number today from Pending Home Sales. The biggest market movers coming in the next two days will be a large amount of FedSpeak, finishing with James Bullard on Friday morning. I still see most markets in a series of lower highs and lower lows on the daily chart, which means that we might get another thrust down in the near future…
If the video above does not play, please try this version of the video with embedded player.
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.
- I will close the ABBV position tomorrow.
- Please note the closing levels for new trades entered 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 below average today. Breadth was mixed with +30 advancers minus decliners.
SPX Market Timer : The Intermediate line flattened below the Upper Reversal Zone, now showing a bearish bias. The two weaker lines have bounced higher and are almost showing a Weak Bearish Cluster..
DOW Theory: The SPX is in a long term uptrend, an intermediate uptrend, and a short-term uptrend. The RUT is in a long-term uptrend, an intermediate downtrend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX fell .99% to 11.42, back inside the bollinger bands. The RVX dropped 3.26% to 16.34 and is back inside the bollinger bands.
Fibonacci Retracements: Fibs are not in play right now.
Support/Resistance: For the SPX, support is at 2188 … with no overhead resistance. The RUT has support at RUT 1300 with no overhead resistance. All three major index charts that we follow are now showing a Golden Cross with the 50 day moving average crossing above the 200 day average.
Fractal Energies: The major timeframe (Monthly) is now into exhaustion with a reading of 30. The Weekly chart is now just above technical exhaustion with an energy reading of 40, due to the recent chop. The Daily chart is showing a level of 48 which is losing energy due to the downtrend. It’s rare when we have all three major timeframes in exhaustion as we had for two weeks.
Other Technicals: The SPX Stochastics indicator fell to 40, mid-scale. The RUT Stochastics indicator rose to 46. above oversold. The SPX MACD histogram rose below the signal line, showing a return of upside momentum. The SPX is back inside the Bollinger Bands with Bollinger Band support at 2338 and resistance at the upper band at 2393 and is above the lower band. The RUT is back inside the Bollinger Bands with its boundaries at 1340 to 1401 and price is above the lower band.
We are seeing the market pricing in a shift in character out of the recent lifeless Fed-driven economy, and into an unrestrained one. I think this will bring about a big shift in how the market behaves, but a pullback to stoke up the negativity and move into a larger trading range would be a good thing to see first.
Position Management – NonDirectional Trades
Offense: I still do not want to set up OTM credit spreads in this low-vol environment until we see real movement to the downside. If and when we get this movement we’ll need to identify levels that we want our credit spreads to be “below.” This is the same type of price action that was so perilous to HP condors back in 2013, so let’s not fight it.
If I see price drop to the SPX 2300 level, this might be our first opportunity to sell premium against that level.
I have the following positions:
- SPX 24APR 2285/2290*2375/2380 LP Iron Condor (3/27) was entered for a $2.50 credit, and I will look for a $2.00 exit debit. no positions at the current time.
- SPY 21APR 238/239 debit call spreads (3/28) were entered (3/28) for a $.21 debit to help hedge the upside on the LP Condor.
No new positions for now; let’s let the SPX find itself in the current range.
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I have the following positions:
- ABBV 31MAR/7APR 64.5/66.5 Call Diagonal (3/20) was entered for a $.97 credit. I will close this position tomorrow.
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:
- SDS Stock – I still own 100 shares of this stock from 2011 and will continue to write calls against this position with every correction/pullback.
- VXX Stock – I own 12 shares of this stock and will hold until Armageddon occurs.
- SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level. I sold 19MAY $18 calls (3/27) against this position for a $.22 credit.
- RIG I’m going to add more puts once we determine that the ” range” is printed on US markets. .
- X – I added the 19MAY $25 puts (3/13) for $.37 credit.
- AMD – I sold the APR $11 puts (2/27) on AMD for $.19 credit, and I sold 19MAY $10 puts (3/27) for a $.25 credit.
- NVDA – I sold the 19MAY $80 puts (3/13) for $.90 credit. We need to look for the next pullback before selling again.
If we get more of a pullback then I can be a little more aggressive with this strategy. I have a feeling that a lot of things will be on sale before long.
Position Management – Directional Trades
- 8/21 EMA Crossover – The 8/21 ema is starting to cross over to the downside now. I am taking the QQQ put spread on this signal .
- RSI(2) CounterTrend – I have the following positions:
- XLF 7APR 23/24 call debit spread (3/28) was entered for a $.50 credit; I will look for a 50% return on this position.
- XLF 7APR 23 long call (3/28) was entered for a $.61 debit. I will look for a 100% return on this position.
- Daily S&P Advancers – if I see the number of daily S&P500 advancers drop into single digits near the close of any trading day, I will go long shares of the SSO.
- QQQ 19MAY 116 Puts (2/16) were bought for $.70 debit. Still need more downside movement to light these up.
- CRM 21APR 79/80 Put Spread (3/21) was added for $.20 debit, and was closed (3/28) for a $.31 credit. This gave me a net profit on the trade of $9/contract, or a 45% return on capital.
- QQQ 28APR 130/132 debit put spread (3/28) was entered for $.85 debit. I will look for a 50% return on my position.
I have the following positions:
- BIDU APR17 190/195 Debit Call Spread (1/30) entered for a $.98 debit.Understand that I do not have a “stop” in this trade. I closed down half of the contracts (2/17)for a $1.82 credit, or a net profit of $80/contract. I will hold the rest of the contracts longer-term and wait on the breakout.
- TWTR 16JUN 21/22 Debit Call Spread (2/6) was entered for a $.20 debit.
- VLO 31MAR 67.5/69.5 Debit Call Spread (2/28) was entered for a $1.00 debit. I want to be on the ball tomorrow and Friday to see if I can harvest any value from this one on any kind of rally..
There are several Whale longs that are setting up nicely and might allow a counter-trend entry in this corrective period. Be aware that any counter-trend longs could fail immediately if the larger market starts to erode again. Here are some of the candidates:
- BBY Long above $45.85 (this one is already gone!)
- MSFT above $66
- T above $42.72
Quite honestly, selling the “financing” trades has been a huge challenge in this low-vol environment. I will only sell put spreads on decent pullbacks that allow me to secure put spreads 10% OTM
Per Thursday’s report I added the JUN17 long puts. I can’t think of a better market condition to be adding long puts.
I will likely clear all put options if the price drops 5% from the recent highs at SPX 2400. Not sure that I can expect much more than that given the current climate.
We currently have the following positions in play with this strategy:
- SPY JUN17 215 long puts – I entered this position (3/17) for a $1.19 debit.
- SPY APR17 206 long puts – I entered this position (1/27) for a $.92 debit.