Daily Market Newsletter

Are we just building the “lower high” on the index charts before the next drop, or are markets just incredibly resilient with no other valid alternatives out there to park money? In today’s video I’ll cover what I’m looking for out of the short-term charts.

You’ll also notice that I’ve removed the “earnings” section from the last section below, and replaced it with the “crypto” section; this is where we’ll start to feature trades on Bitcoin, as well as inexpensive Altcoins. It’s a brave new world, let’s get on board before everyone else turns this into a bubble. The latest crypto video (Researching Altcoins) is available here

I’m going to be traveling from Thursday clear to Sunday evening; the Thursday newsletter might be somewhat late in delivery.

If the above video does not play, please try this version.

Offensive Actions

Offensive Actions for the next trading day:

Weekly EM levels have been set; see “weekly EM” section below.
No other offense tomorrow; still keeping offense light into what is historically a low-volume holiday week, although volume will increase by week’s end.

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

Technical Analysis Section

Market Internals: Volume was average today. Breadth was mediocre with +125 advancers minus decliners.

SPX Market Timer : The Intermediate line turned up below the Upper Reversal Zone, now showing a bullish bias. No leading signals at this time but still close to showing another bearish cluster with another day to the upside.

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 to 11.63, back inside the bollinger bands. This is after a twenty-year low on the VIX. The RVX fell to 15.96.

Fibonacci Retracements: If we see the pullback continue then I’ll start to determine fib levels that might act as potential support.

Support/Resistance: For the SPX, support is at 2410 … with overhead resistance at 2484. The RUT has support at RUT 1350 with overhead resistance at about 1452. 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 down into exhaustion again with a reading of 34. The Weekly chart is now recharging quickly with an energy reading of 67, due to the recent chop. The Daily chart is showing a level of 53 which is now charged up again after this recent chop. We are seeing the movement that we expected, however with an exhausted monthly chart, I don’t think any breakout will be able to reach its potential.

Other Technicals: The SPX Stochastics indicator rose to 61, mid-scale. The RUT Stochastics indicator rose to 70, below overbought. The SPX MACD histogram fell above the signal line, showing a loss of upside momentum. The SPX is back inside the Bollinger Bands with Bollinger Band support at 2421 and resistance at the upper band at 2483 and is below the upper band. The RUT is back inside the Bollinger Bands with its boundaries at 1351 to 1414 and price is at the upper band.

We are seeing the market reacting to any fear catalyst right now, and we’ll be watching to see if the price is able to make new highs or not. The overall trend is still higher and short-term energy is building quickly on this non-linear chop.

Position Management – NonDirectional Trades

I have no positions in play; I will wait on the first significant pullback to allow me to secure put spreads below support. We can finally sell positions for SEP below SPY 230 but my sense is that still isn’t worth the risk just yet. A 10% correction would put the price at SPY 224 and we’d want to be well below that level with short puts.

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 no positions in play. At this point I’m expecting movement again because short-term charts are strongly charged, so it makes no sense to pursue an order with this strategy until we see (at the very least) a daily exhaustion signal.

I have no current positions; no current setups showing. Too much energy on the short-term charts in the SPY. I will look to set up a calendar spread if we see daily exhaustion.

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 the 15SEP $16.5 calls (7/24) for $.17 credit.
X – I was assigned at the $25 price level. I then rolled the position forward to SEP17 $25 calls for $.68 credit. This continues to lower my cost basis and gives me a little bit more downside protection if the trap door opens.The price has been driving higher lately and there is an improving chance that I can get called out for the SEP cycle. My hope is that I can get called out early prior to any drop in price. I still do not like this pattern, and would like to see as much time value decay out of the call first before the position is closed for a profit. Once the call option becomes near 100% intrinsic value then we’re better off closing the position.
AMD – I sold the 15SEP $12 puts (7/31) for $.40 credit. I would sell the position if it closed below $10/share. Looks like we’re seeing a timely bounce that might allow us to avoid assignment. If these positions get down to a couple of pennies to close then I’d be better off shutting down the position.

Not looking to add anything at these levels at this time. I’d like to keep my powder dry and wait on a more severe correction.

Position Management – Directional Trades

Thoughts on current swing strategies:

8/21 EMA Crossover – Looking for the next 8/21 ema entry.
RSI(2) CounterTrend – I will continue looking for additional setups as long as markets are trending higher
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.

This is a new section that I’m starting in the summer of 2017; all Cryptocurrency trades are by definition going to be “directional” trades due to the fact that there are no premium-selling strategies available.

Please refer to the left sidebar section if you’d like to get caught up on “FAQ” -style intro videos.

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.

In today’s video I continue the discussion of how we’re seeing what is the beginning of the next correction in crypto, and how you can take advantage of this.

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.”

Here is today’s video which is “Researching AltCoins.”

This is a new section that I’m going to start laying out trades for weekly “expected moves.” The S&P500 has done a nice job of moving pretty much to one end of the overall expected move every week. We can either speculate on that direction ahead of time using OTM spreads, or we can “fade” the price when it hits one of the EM levels.

Viewing the SPY from the current Friday closing price at 247.84, there is a +/- 1.982 EM into this Friday. This is smaller than last week’s EM, and back down to previous week’s EM values of about 2 points during most of the summer.

The EM targets for this Friday’s close is 249.82 to the upside, and 245.86 to the downside.

The downside marker was hit today so the upside fade is on. Per yesterday’s newsletter I added the 6SEP SPY 246.5 call option for $.58 and sold it in the afternoon for $.74; not quite the reaction that I was looking for today.

I have no positions at this time. Nothing else to enter at this time.

I have the following positions:

SPY 15SEP 249/250 Call Spread (8/28) was entered for an $.11 debit, and looking for the price to re-test recent highs. I will look to sell this position into strength this week as the daily chart approaches exhaustion

I missed the TIF vertical today as I could not find the right combinations to make the spread work with liquidity..

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.

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

With a new all-time low VIX, the opportunity to buy inexpensive short deltas was too great, so I added some OCT puts recently.

We currently have the following positions in play with this strategy:

SPY OCT17 222 long puts (7/24) – I entered this position for an $.85 debit. This position was up 50% and the temptation to remove it for a profit is strong, however the point of these trades is to hedge the downside for existing longs, AND try for those home runs on corrections that come out of nowhere.