Daily Newsletter
October 29, 2019Non-Directional Strategies
Semi-Directional Strategies
Directional Strategies
Bitcoin/Crypto
View Doc's New Book
November Expiration
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Market Commentary
Another somewhat split day in the markets as the big “risk event” comes up tomorrow with the Fed Policy Release at 2pm ET. There is a 97.3% chance of seeing a rate cut tomorrow. This is already priced into the market for tomorrow, so there will likely not be much reaction to that event, however it’s always about the subsequent statements and press conference where the risk comes to bear, and could lead to a very volatile day should Powell veer even slightly off-script .
An interesting post from Jason of Sentimentrader.com today:
This kind of goes in line with my thinking that most folks are getting very defensive with this market and are pulling funds out.
To put the cherry on top tomorrow, after the market close we have AAPL/FB earnings.
The following companies report earnings over the next few days:
- Wednesday: AAPL, CME, FB, GE
- Thursday: BMY
- Friday: ABBV, BABA, X, XOM
- Monday: OXY, UA, UBER
- Tuesday; Small Caps:
- Future FB, AAPL 10/30
After tomorrow, the market is essentially on its own until December.
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:
- No additional entries 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.
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 today with advancers minus decliners showing mixed value of +53 at the closing bell.
SPX Market Timer : The Intermediate line has turned up into the Upper Reversal Zone and is now “Bullish.” The Near Term line has joined it in the upper reversal zone, creating a strong bearish cluster for the third day in a row with the two stronger timeframes overbought. This can be a leading signal for a pause.
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 sideways trend, and a short-term uptrend. The Dow is in an intermediate uptrend and short-term uptrend.
VIX: The VIX rose to 13.23, inside the Bollinger bands. The RVX rose to 17.02 and is inside the Bollinger bands.
Fibonacci Retracements: The price is back near the highs and fibs are not in play.
Support/Resistance: For the SPX, support is at 2825 and overhead resistance at 3028. The DOW has support at 25500 and overhead resistance at 28399. The RUT has support at 1450 and resistance at 1600.
Fractal Energies: The major timeframe (Monthly) is charged again with a reading of 52. The Weekly chart has an energy reading of 62, now fully-charged. The Daily chart is showing 34, in exhaustion again from the recent uptrend. Larger timeframe energies are waiting on a very big move, which will start with the smallest timeframes.
Other Technicals: SPX Stochastics rose to 90, overbought. RUT Stochastics rose to 91, overbought. The SPX MACD fell above the signal line, showing a decrease in positive momentum. The SPX is below the upper bollinger band with the range 2884 to 3062. The RUT is inside the bollinger bands with the range 1458 and 1587.
Position Management – NonDirectional Trades
I have the following positions in play at this time:
- SPY 15NOV 281/282*310/311 Long Iron Condor (9/30) was entered for a $.16 debit on the puts and $.18 debit on the calls. I will look for a 200% return on either side. Not enough gamma to get the put side to fire on the recent downdraft.
No additional orders at this point.
I have no positions in play:
This is not the right character of market for this strategy at this point. If we start to see the market release back into “quiet and trending” character again, we can look for the first SPX exhaustion signal to set these up.
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 SEP $17.50 calls (8/13) for $.18 credit and closed down this position (9/5) for a $.44 debit. I will let this price chart trend as much as it wants to in the near future before writing against it again.
- CSCO – My cost basis is now $47.95/share after the latest trade and dividend payment. I sold the JAN20 $50 calls for $1.94/contract so our cost basis could be as low as $46.01 depending on the outcome of those JAN calls. I don’t want to see this trade below $46/share on a closing basis.
No other trades at this time.
Position Management – Directional Trades
Thoughts on current swing strategies:
- 8/21 EMA Crossover – The long cross has fired again. I would look for the first pullback between the 8ema and 21ema.
- RSI(2) CounterTrend – I’ll look for the next setup.
- Daily S&P Advancers – Looking for the next signal to go long with single-digit advancers to close the day.
- Swing – None at this time..
Bitcoin had a huge day on Friday the 25th, effectively interrupting the downtrend. We’ll see if it can build on this bounce.
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 301.60 there is a +/-3.423EM into this coming Friday; this is slightly smaller than last week’s 3.794 EM. The EM targets for this Friday’s close are 305.02 to the upside, and 298.18 to the downside.
The price stayed just within the range last week, fading Friday to just below our upper EM marker. and we might see the same this week as well with a smaller EM range in the face of what should be larger volatility with the Fed and major earnings this week.
I have the following positions in play:
- SPY NOV 299/300 Debit Put Vertical (10/17) entered for a $.37 debit. I will seek a 50% return on this trade.
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:
- NKE 22NOV 96.5/97.5 debit call spread (10/21) entered for $.50. I will seek a 50% return on the trade.
- MSFT 29NOV 145/146 debit call spread (10/28) entered for $.50 debit. I will seek a 50% return from the trade.
- V 29 NOV 180/182.5 debit call spread (10/29) entered for $1.15 debit. I will seek a 50% return.
No other trades at this time.
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 open positions at this time. Skew is making OTM puts really expensive now.
If we see a decent bounce back up I might consider reloading.