Daily Market Newsletter
May 20, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
June Expiration
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Market Commentary
Hello all. It is Alex here covering for Doc while he is enjoying a well deserved vacation.
Weekends, of late, have been catalysts for significant moves. Whether it is from tweets, or geopolitical news like Brexit or trade wars, the after market movement on weekends has certainly provided some significant gaps on the Monday morning open. On Doc’s weekend video, Doc talked about placing straddles on Friday with a Monday expiry to catch these potentially big weekend moves.
Well, this weekend, once again, did not disappoint from that perspective. It was a smorgasbord of trade war fallout following the blacklisting of Huawei’s technology in the US, renewed uncertainty around Brexit, and potentially escalating tensions with Iran. This all helped, once again, the markets to gap lower with the SPX being down almost 28 points before the open. While the markets fought for the first couple of hours to close the gap, they eventually failed and once again succumbed to the selling pressure into the close hitting it’s daily low with 45 minutes left in the trading session. If there was some good news for the market it was that in the last closing minutes we did get a bounce – something that we haven’t seen a lot of lately going into the closing bell.
On the daily chart we have started the down-leg that Doc talked about in his weekend video. We need to watch in the coming days whether this down-leg continues and takes out the SPX 2800 support level from which it bounced off of last week.
If you have any questions, please feel free to reach out to me at alex_docs_trading@outlook.com
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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 Monday.
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
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Technical Analysis Section
Market Internals: Volume was below average Monday and breadth ended the day modestly weaker at -115 advancers minus decliners. The low-water mark of the day was -438 advancers minus decliners right at the open showing extreme weakness as a result of the overnight gap down.
SPX Market Timer : The Intermediate and momentum lines have hooked while the near-term is still well within its cycle. 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 rose to 16.31, inside the bollinger bands. The RVX rose to 19.85 and is inside the bollinger bands.
Fibonacci Retracements: The pullback has pulled price down to the 61.8% retracement of the March/April swing. Today’s downswing has retested the 50% retracement on the way back down.
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 48, gaining slightly today. The Daily chart is showing a level of 53 which is charged again and starting to recover from the bounce. 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 34, mid-scale. The RUT Stochastics indicator fell to 32, mid-scale. SPX MACD histogram has fallen below the signal line, showing downside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2814 and resistance at the upper band at 2979 with price is above the lower band. The RUT is inside the Bollinger Bands with its boundaries at 1525 to 1624 and price is above the lower band. The RUT tested the lower band today and closed only slightly above the lower band.
Position Management – NonDirectional Trades
I have no remaining positions 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. The calls expired for a net $95 loss so our return on this trade was a net 27.2% after commissions.
With the S&P500 charts nearly at full energy again across the board, it might be time soon for another long condor.
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.
No additional stock plays until I return from travel 2nd week June; I’d like to see if the current pullback plays out a little deeper.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – Looking for the next signal. I don’t like these signals to the short side.
- 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. At this point any kind of positive return on this trade would be welcome as I’m running out of time, a shame as this trade was within a penny of firing at my target.
Crypto had a big rally this week, and Bitcoin had a monstrous dump on Friday, effectively shaking off all of the late-to-the-party longs. So far the price action is positive.
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 285.84, there is a +/-5.309 EM into this coming Friday; this is about the same as last week’s 5.539 EM. The EM targets for this Friday’s close are 291.15 to the upside, and 280.53 to the downside.
The lower EM for this week lines up with the low test of last week, so this might be a good level to fade with an ITM call option should it be tested and offer support.
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 no remaining positions in play at this time:
- TGT 17MAY 80/82.5 debit call spread (4/9) entered for $1.25 debit and expired OTM for a net $254 loss on two contracts.
- SBUX 31MAY 77/78 debit call spread (4/29) entered for $.48 debit and closed (5/16) for $.72 credit. This gave me a net profit of $20/contract or 42% net return on capital after commissions. .
- MCD 7JUN 197.5/200 debit call spread (5/6) entered for $1.14 debit and closed (5/17) for $1.57 credit, giving us a net $39/contract profit or a 34.2% return on capital after commissions.
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.