$SPY – I may keep this chart forever

What a day this day was!

Here’s my tweet from this morning.

The blue chart below is the result with the profits per my $10K day-trading options strategy in the white flag on the lower right – up 328% on the close.

(click on the chart for a larger view)

$SPY – Market breadth takes a toll on a “Big Wednesday”

In surfing lore, there is the myth of “Big Wednesday.”

The myth was immortalized in the 1978 cult film “Big Wednesday,” written and directed by John Milius, who also wrote such movies as “Jeremiah Johnson”, “The Wind and the Lion” and “Apocalypse Now.” It was Milius’ contention elite surfers cannot acquire true greatness, legendary greatness, until they face and overcome the great waves, the legendary waves that rise and surge and rage along the California coast from out of almost nowhere. No one know why they come or when they come but as the movie puts it: “They always come on Wednesdays.” Maybe what Milius had to say about surfers should also be applied to market traders and investors.

Today was a big Wednesday in the stock market.

The Dow was down more than 800 points, the Nasdaq more than 300, the SPY nearly 100 points. Big moves out of, I guess one could say, flat surf on Tuesday.

Actually this was no real surprise.

There have been signs everywhere. The general market indexes have been rising in price to all time new highs for the past month in defiance of long-term breadth as measured by the McClellan Summation Index, the $NYSI (see the declining red dots on chart below). That was rather amazing to watch, particularly the way the NYSI kept falling day after day despite the lingering bullishness on the indexes, and in the end, as always, the NYSI took its toll.

In a head-to-head battle between price and market breadth (the sum of all stocks rising and falling) it may be hard to tell when the battle will end but it will end with breadth winning every time.

Long-term breadth is the most effective indicator of mass market psychology there is.

Even as market appeared to be rising on a few tech stocks alone — AMZN, FB, NFLX, NVDA, GOOGL and most notably AAPL — breadth was saying the bottom was falling out. When those stocks began to crumble (look up charts of FB, NFLX…), this day became all but inevitable.

Signs everywhere. Besides the obvious relentlessness of the NYSI, the economy-sensitive housing stock have been falling for months with the banks beginning to tumble with them (many of the banks broke major price supports today just like in 2007-2008); news low began to outpace new highs in late September and accelerated on October 4th (which also happened in 2007-2008); there were also rare whispers under the surface like the day the Dow made a new high while more than 50% of the SPX stocks were below their 50-day moving averages (last seen at the exact market top in 2007).

So is this the beginning finally of the bear market to come that is just as inevitable? Don’t know yet. The market can plunge farther now (as I write this it is in overnight futures trading); it could even crash. But it won’t be a bear market for sure until it rallies and that rally fails below the previous highs in the price of the major indexes.

I seldom have anything to say about fundamentals, since the technical trumps the fundamental every time, but probably I should mention when one considers what comes next, the here-and-now is a bull market that is ten years old, interest rates are rising, unemployment is at its lowest level in forever, margin debt in stocks is near its high and at an astronomical level; there has been a tulip craze in crypto-currencies, a mania in block-chains, and the strongest sector in the market right now is the weed patch, marijuana stocks.

If this is the death of the bull and the birth of a bear, everything I’ve just mentioned will not be with us much longer.

(click on the chart for a larger view)

$LVS and $WYNN – winning on the losing gambling stocks

The big tumble in the gambling stocks is probably another fall out (fall down?) from the Trump trade war with China.

Who woulda thunk the Chinese would quit the gaming tables in Macao, where both LVS and WYNN have major casinos, over a little tariff tiff?

Then again, this might be Steve Wynn, at WYNN, shuffling off the world stage in a Me-Too shadow, or maybe Sheldon Adelson, at LVS and one of Trump’s biggest campaign contributors, getting a mega-dose of whatever…

As they say, you never know how the chips are going to fall.

Actually, you can know.

Take those rectangles on the LVS and WYNN at the top of the charts below…Those are Darvas Boxes, pioneered by Nicolas Darvas years ago. Play with those enough by drawing boxes around price consolidations and taking the trade as it either comes out of the top or in the cast of these two out of the bottom of the box, and then add in a moving average to mark the path of least resistance and one can be up 23% since summer in LVS and 35% in WYNN by being short the downs in those stocks.

There is also a lot of simplicity in the gamble that is the stock-market game.

Also, take note these leaders in the gaming sector also show even in a raging bull market, there’s always a bear market somewhere.

So what now? More to come. There are no signs these two stocks are finished with their fall, and they will have to base, going sideways, for a long time across some bottom before they can recovers and have any chance of racking up winnings on the long side again.

(click on the chart for a larger view)

$COMPQ – a bounce for the rest of the week…

Once again, the market, particularly the Nasdaq, is oversold in these last rapid-fire down days off the top six days ago.

It is as if it has gone down too far too fast.

So…a bounce.

When the Nasdaq Composite, as measured by the blue histogram on the chart below, plunges to the lower green line, it is almost always, first, the prelude to a bounce, and then oftentimes the next up swing (see previous instances on the chart).

In addition, the Nasdaq is setup again for a “Turnaround Tuesday.” I last wrote about this Tuesday phenomenon Sept. 10th (see the link below), and Tuesday, the 11th, was a huge upsurge across the general market.

“TURNAROUND TUESDAY”

It is possible the market could go lower before the projected reversal into the end of the week but don’t count on it. This is still a bull market and right now the bulls need to prove they can stop this drop and run it up again as they have so many times before.

If the bulls can not rule the rest of this week…well, we’ll get to what that could mean in due time.

I’m expecting a bounce right now. Tomorrow is a day to focus on the open for longs in stocks, options and futures on the major indexes, but I always keep in mind what Trader Vic Sperandeo once said: “If the market doesn’t do what one expects, it is likely to do the opposite twice as much.”

(click on the chart for a larger view)

#DayTrading $SPY #Options – today’s 291 put UPDATED

–The 291 put, in the money, and up 100-plus percent at the moment…

The total per $10K traded (also the percentage gain) is in the white flag on the lower right of the updated chart below.

My definition of a trending day is any time the trade in the calls, puts, or a combination of both gains more than 100%. Today’s put may not hold to the close at more than 100% but it has touched that level for the second day in a row (yesterday it faded to just under 100%).

(right click on the chart for a larger view of this UPDATED CHART)

$SPY Options UPDATED – a day worth trading for 95%

For the past three days SPY puts have been itching to go up, and today they went.

See the blue-gray bars on the chart below going into the close yesterday for an example. That’s the way the color-coding has been all three days.

At the moment, the in-the-money 292 put for Friday’s expiration is up 110%, $10K-Plus for each $10K in play.

I define a “trending day” as anytime the calls or puts on the day trade close up with a profit of more than 100% on my system trigger.  That, of course, is yet to be seen today (will update on the close).

UPDATE ON CLOSE: The 292 put closed up 95.09%, $9509 per $10K traded, just missing being an official trending day. It peaked during the day at up 190.5% and gave and intraday stop at up 134.9% (see the end of the blue/gray bars on the updated chart below).

As a result, trending days so far this year remain at 27.

Day trading options on the closest expiration is always volatile.

(right click on the chart for a larger view)

DAYTRADE2018-08-24_1113

 

#MarginDebt – a sign of quiet desperation?

I gotta say, as a day trader, I’m beginning to wonder if this is the most bearish bull market ever – gap it up overnight with futures, sell it down all day.

I suspect this could be a sign some big boys are desperately trying to slip out of the market without anyone noticing, but what do I know about such machinations?

Needless to say, margin debt is at astronomical levels in comparison to 2000 and 2007. Since the chart below was published for August, the SPX has gone to a new high in September. We will not be able to see what margin debt has done at the same time since the data going into the chart calculation is assembled monthly (why is that?). But even if it goes to a new high also (a sure sign of continuing greed), it will only mean the bull market has more time to rise but also at an ever more risky height from which to fall.

(click on the chart for a larger view)