Daily Market Newsletter
May 14, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
May Expiration
Day(s)
:
Hour(s)
:
Minute(s)
:
Second(s)
Market Commentary
Is this going to be the first “sell in May and go away” that we’ve seen in years? It certainly feels like it but I’ve learned the hard way over the years that markets often move opposite to the feelings of the “herd.” And I almost hate looking at mainstream media news for any glimpse of “what happened today?” because it tends to give you confirmation bias. The news today is filled with all sorts of scary data points and smart-looking people with impressive titles warning you about dire consequences.
But the charts still look good.
Sure, there’s been a hard pullback of 5% over the last week (finally). It came just as the price peeked at new highs – a pretty common place for bulls to over-extend and get pulled under. None of the larger timeframe trends are negative. The Dow, S&P, and Nasdaq are all above the 200 ma. We don’t have any “lower high” signals showing, although any bounce from here could certainly create that.
If I were not traveling for the next few weeks, I would consider setting up a HP bullish credit spread at about 2600. In fact, call spreads could be set up above the current highs as well, to create a full HP Iron Condor. The energy signals do not support setting up a full short condor now, as they show that a big move is imminent shortly. But the price action looks as though the volatility is about to increase first.
Strategies to play? This might be a time for caution to let this drop play out. This is doing a perfect job of recharging the weekly chart. Let’s not be in a rush to buy the dip just yet.
Subscriber Update: I will be out of the country and not producing the report from Monday May 20th until Thursday June 6th; in my stead will be Alex who has started to do some guest videos (below) so that you get used to his voice and style. I will also NOT be setting up any positions that require any attention, they will be more of the “fire & forget” version. Once I return on June 7th we’ll be setting up trade positions again, unless Alex spots some good opportunities that he wants to share.
Please sign up for our free daily crypto report here.
Here is Alex’s weekend video discussing “volatility” trading strategies.
Offensive Actions
Offensive Actions for the next trading day:
- I will set up the next series of short calls on SLV by selling the 19JUL $15 calls; see “stocks” section below. I will keep this as an open order.
- No new orders 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.
- Closing orders have been entered for all new spreads.
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
%
%
%
Technical Analysis Section
Market Internals: Volume was just above-average today and breadth ended the day relatively strong with +318 advancers minus decliners. The high-water mark today was +416 advancers minus decliners, very strong.
SPX Market Timer : The Intermediate line fell from the Upper Reversal Zone, now showing a bearish bias. No leading signals at this time..
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 uptrend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term downtrend.
VIX: The VIX fell to 18.07, back inside the bollinger bands. The RVX fell to 21.04 and is back inside the bollinger bands.
Fibonacci Retracements: The price has pulled down to the 61.8% retracement of the March/April swing.
Support/Resistance: For the SPX, support is at 2791 … with overhead resistance at 2954. The RUT has support at RUT 1500 with overhead resistance at 1617 and 1742. All indices that we track recently showed a Death Cross with the 50ma crossing below the 200ma; this can be a leading signal for a true Bearish move. It can also signal “false” and create a massive swing higher. We might be seeing the latter scenario as the Dow ,S&P500, RUT, and /NQ have now printed a Golden Cross.
Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 54, yet is starting to reflect the reversion to the larger uptrend again. The Weekly chart has an energy reading of 46, gaining energy on this pullback. The Daily chart is showing a level of 48 which is charged again but starting to reflect the energy draw from the move down. This price action is doing an excellent job of recharging the Weekly chart and we’re almost looking at three primary “charged” charts again, which is a precursor to a big move.
Other Technicals: The SPX Stochastics indicator fell to 46, mid-scale. The RUT Stochastics indicator fell to 57, mid-scale. SPX MACD histogram fell below the signal line, showing a loss of upside momentum after negative divergence. The SPX is outside the Bollinger Bands with Bollinger Band support at 2834 and resistance at the upper band at 2977 with price is at the lower band. The RUT is inside the Bollinger Bands with its boundaries at 1537 to 1620 and price is above the lower band.
Position Management – NonDirectional Trades
I have the following position in play:
- SPY 17MAY 282.5/283.5*297/298 Long Iron Condor (4/22) entered for $.16 on the put side and $.17 on the calls. The puts were closed (5/13) for a $.48 credit. This gave us a net $140 profit from the puts alone. When we set up this trade on 4/22 we had expected an 8 point EM, and that came to realization today plus some. Now we’ll see if we can harvest any value from the calls to increase our profits.
If we see a little further pull to the downside, we might want to consider setting up a HP put credit spread on the SPY.
I have no positions in play at this time.
No additional trades at this time; the timing is absolutely crucial on these trades so we have to find absolutely exhausted conditions prior to taking these entries.
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 will go out to the 19JUL series and sell the $15 calls for at least $.15 credit.
I still like AMD but we should let this overall market pullback play out.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking for the next signal.
- 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 – I set up a long swing trade on the Russell 2000 via the IWM (4/24), with a 24MAY IWM 163/164 debit call spread (4/24) for $.20 debit. I will look for 100% return on this trade.
Crypto has come down to a one-coin market (Bitcoin) which is absolutely ripping higher from a complex bottom. Not a great place to accumulate until the price fades lower first.
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 Thursday’s close at SPY 288.10, there is a +/-5.539 EM into this coming Friday; this is about 50% larger than last week’s 3.477 EM. The EM targets for this Friday’s close are 293.64 to the upside, and 282.56 to the downside.
The lower EM got blown through this week after only one day. This was our “go-to” fade but the price level did not support the first test, so this trade is off for 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:
- TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit. We will look for a 50% return on this trade. This one will expire OTM on Friday.
- SBUX 31MAY 77/78 debit call spread (4/29) entered for $.48 debit. I will look for a 50% return.
- MCD 7JUN 197.5/200 debit call spread (5/6) entered for $1.14 debit. I will look for a 50% return.
We are also keeping an eye on the Momentum stocks in this section. Most of those are a little extended at this point and this pullback might do the rest of the market a lot of good. I would like to let the market settle first before going heavily long.
No other entries at this point.
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.