Daily Market Newsletter
May 26, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
June Expiration
Day(s)
:
Hour(s)
:
Minute(s)
:
Second(s)
Market Commentary
Hello all. It is Alex here covering for Doc who is on vacation for the next couple of weeks.
This week was, at many times, a roller coaster ride with equities significantly gaping up and down several times at the open throughout the week. Of all the days that peaked my attention, it was the Friday closing into the long weekend that caused me some pause. After Thursday’s battling throughout the course of the day and finally finishing strong in the closing hour, that trend continued in the after hours with the S&P’s continuing to push higher continued overnight and right into the open where, shortly after the open, the S&P’s were up some 20 points from it’s close the previous afternoon. Within a couple of hours of the open, we had made the round trip and closed the gap showing little for the ‘bounce back day’. All indices closed up slightly, but certainly not with much conviction.
On Thursday the Russel had briefly breached one of it’s current support points at 1500, Like the SPX, it too made a run to close the gap, however it was successful at reversing and finishing off a couple of points off the high for the day. Overall for the week, the Dow Jones was down -0.7%, the S&P’s down -1.2%, the Nasdaq down -2.3% and the Russel down -1.5%, with all of the indexes posting, at minimum, their 3rd consecutive weekly loss in a row.
Trade wars certainly carried the majority of the financial press this week, along with the odd Brexit twist thrown in just to throw in some color and remind every one that there are still some other bid hurdles out there. The continued perception of the prolongation of the trade wars continue to damped any optimism over additional tariffs not being implemented as the two sides remain in a stalemate position. Ongoing reports of GDP contraction, both domestically and worldwide, have been weighing on the minds of investors where sectors such as oil and retail are getting hit hard while safe havens like utilities are continuing to push higher as money continues to flow into the ‘safe’ sectors.
Last week’s expected move in the S&P’s for the 5 trading days was $54. This week our expected move for 4 trading days (Monday markets are closed) is $47. While the VIX contracted somewhat on Friday, the overall price movement on Friday (running higher right up to the open then closing the gap resulting of a net gain of virtually nothing), on top of Thursday’s action of hitting the entire expected move in one session, leads me to believe we are going to some significant volatility this week. We have huge energy on the daily charts giving us better than even odds of some significant moves in the very near future. My strategies are to continue to be completely non directional right now and look for the big moves to happen that outpace the premiums paid.
Everyone have a great rest of their long weekend and we will see you again on Tuesday for the daily market update
Alex
If you have any questions, please feel free to reach out to me at alex_docs_trading@outlook.com
Please sign up for our free daily crypto report here.
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
%
%
%
Technical Analysis Section
Market Internals: Volume was back down below average on Friday as the markets wound down for the long weekend. The advancers versus decliners ended up slightly at +87 after hitting the high for the day of +448 shortly after the open and then fading for the rest of the session
SPX Market Timer : The Intermediate and momentum and near-term lines are in a divergent position. 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 sideways trend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term downtrend.
VIX: The VIX contracted by over 6%, closing at 15.85, inside the bollinger bands. Likewise, the RVX contracted over 6% as well, closing at 19.41, and is inside the bollinger bands.
Fibonacci Retracements: The pullback had pulled price down to the 61.8% retracement of the March/April swing. after sitting in the consolidation wedge we made a significant move back towards the 61.8% level that was hit mid month.
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. The Russel remained just above the 1500 support level for the entire session after having briefly breached it on Thursday’s session.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 53 but slowly dropping as some of the old choppiness works itself off. The Weekly chart has an energy reading of 49, pushing higher. The Daily chart is showing a level of 65 which in creased significantly as we have started to drop off some of the large candles from 13 days ago. The daily energy has increase to peak levels seen only a couple of other times in the last 3 months. With the energy levels we are now seeing, we should expect to start to see some significant moves.
Other Technicals: The SPX Stochastics indicator dropped to 37, mid-scale. The RUT Stochastics indicator fell to 18.9, breaching into the lower boundary. The SPX MACD histogram is below the signal line, showing continued downside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2794 and resistance at the upper band at 2962 with price is above the lower band. The RUT closed right at the lower Bollinger Bands with its boundaries at 1496 to 1624 and price is 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.