#MarketTiming – the Santa Claus rally goes crazy

The Santa Claus rally which arrived with a buy signal on the open of December 9th, is still going and going and going…

I wrote about this quiet rally trigger first in this link:

#MarketTiming – with not much fanfare Santa slips into view

Then, as the fanfare took hold:

#MarketTiming – the Santa Claus Rally, a progress report

Since that second post, TQQQ has gone from up from 9% to 17.7%, UPRO from 6% to 11.2%. The 3x-leveraged sector ETFs continue to surge: TECL (tech) up 21% now, ERX (energy) up 18.1% and SOXL (semis) up 29.9%. Among the bellwether stocks I follow, TSLA is leading the pack, up 27% now; NVDA up 13.4%; WYNN up 18.2% on a big jump out of a high-level consolidation today.

AAPL, which lagged early on, has now moved up a nice 10.9%, closing above 300.

Big gains in not much time – the rally is a mere 17 trading days old.

All of which is great for the bulls…except it’s all begun to go kind of crazy.

AAPL has a market cap of $1.3 trillion, somewhat insane no matter how much cash the company generates for buy-backs. MSFT is at $1.2 trillion; both GOOGL and AMZN are knocking on the trillion-dollar door. These stocks have market caps four and five times such “puny” companies as Walmart, Coca-Cola, Nike, Proctor and Gamble, Home Depot and even Exxon-Mobil. How crazy is this?

Speaking of buy-backs, corporate debt is likely piling up more and more as the FED keeps its foot on the printing-press pedal – margin debt did not move much last month so all this “irrational exuberance” has to be coming from somewhere.”

CNN Money’s “Fear and Greed” Index is at 97. Ninety-seven! That in and of itself is the stratosphere of extreme greed. It can’t go higher than 100. A year ago it touched 3, on a trap door that swings both ways.

Still, the market can go higher, and probably will, since there is momentum in that 97 number. It usually takes a divergence (a high below a high) in that index to trigger a decent down swing (see the red circles on the chart below). The index has to back off on a market dip (which is likely imminent) then fail to go higher as the market resumes its advance to another high.

And both breadth measures, the NYMO (short-term) and the all-important NYSI (longer-term) remain positive. So there is time for more rally.

Not much more to say at this time…except to note in markets going crazy (like 1999, like now) there is, in the end, no profit until one sells.

(click on the chart for a larger view)

#MarketTiming – $NYSI $10K stock trades

Long-term breadth (the NYSI) turned up Friday giving a buy signal for the open of the market today.

As suggested in this link #MarketTiming – the NYMO low above a low that was expected and would be necessary to have a chance for a rally. Today’s trading was sloppy sideways, probably just digesting last week’s gains, and although the NYSI did decline it stayed in positive territory.

If there is further weakness, there could be a whipsaw, but we’ll see when we see…

In the meantime, I expect more follow through to the upside.

In this link: #MarketTiming with $10,000 to trade I thought I’d sometimes address trading on limited capital — for the fun of it, for entertainment here and for anyone with limited capital.

The late great Kennedy Gammage of the Richland Report and for many years the keeper of the McClellan Oscillator flame, once wisely said: “Buy when the market tells you, sell when the stock tells you.” If I may, I would add to that “Also buy when the stock tells you.”

If one has but $10k, one needs to study up and pick stock favorites that have the ability to move with the market. Most stocks do move with the market but obviously some move better than others.

Today on Twitter I posted some Day-1 results selected by from my own bellwether stock list as examples of buying with the market as measured by the NYSI either turning up or turning down. Although, $10k readily computeS to a percentage gain or loss, I’m stating those gains in dollars gained or lost.

Clicking on the charts here will display larger chart details on Twitter.

THE WINNERS:

AND ONE LOSER TO SHOW NOTHING’S PERFECT:

#ShortStrangles on #Stocks – 10/14-10/18

THIS WEEKS SHORT STRANGLES:

LAST WEEKS RESULTS:

A PERTINENT QUESTION ON TWITTER:

#MarketTiming – the NYMO low above a low

One of the signs of a true bull market is the follow through off a low-above-a-low pattern in short-term breadth (the NYMO).

The signal is displayed in the top portion of the chart below.

It is buy signal for aggressive traders looking for a rally to begin off a meaningful market bottom. In bull markets, it almost always has follow through to the upside immediately. That hasn’t quite happened in recent months, which has made everything in the current market psychology suspect. See August on the chart as an example.

But it did happen today — after triggering yesterday for today’s open, there was the immediate follow through to the upside.

Now the bulls need long-term breadth (the NYSI) to turn up in the next day or two, which is the trending signal. The NYSI is the smoothed line in the middle of the chart below. It is still falling but…

If both breadth indicators get in line, there is a good chance the market rallies strongly, possibly for several weeks, maybe back to the recent highs, maybe higher.

But, of course, as has happened all through these unstable times, it will be a rally that can be killed by a tweet.

(click on the chart for a larger view)

#MarijuanaStocks – the wither in the weed patch…

At one point last year, the marijuana stock sector was the leading sector in the entire market.

Everywhere analysts were hailing it as the next great growth sector, especially after Canada joined several states in the U.S. to legalize weed, both medically and for recreational use. Made sense, and before anyone could say “don’t Bogart that joint” there were cannabis shops practically fighting Starbucks for retail space.

#MarijuanaStocks – gains are high in the weed patch

At one point, the founder and CEO of TLRY, because he owned so much stock in his heralded IPO, was something like the fourth richest man in the world…for a day. But now that day is done.

The chart panel below tells the rest of the story and there is not much more to say about that.

(click on the charts for a larger view)

#IPOs – a stealth bear market since summer

It appears while the main indexes have held near their highs this year, there’s seems to be a stealth bear market going on with many of this year’s prominent IPOs.

As has been written about here before (last visited in the link below), this is maybe the easiest trade there is in the the market — buy above the high of the opening day, using that high or the low of the first day (depending on one’s individual risk tolerance) and hang on for the long term:

#IPOs – A Great Year For “Dummies”

Well, it was a great year for the likes of SWAV, PINS, ZIM, BYND, SOLY, that is until summer. While none of these stocks have been stopped out (the high of the first day) they have not been going well since summer but as can been seen in the chart panel below there were opportunities to take profits to preserve profits, especially in crazy run ups in say SWAV or the famous IPO for BYND.

Sometimes when stocks just go silly even the most disciplined IPO investor needs to take notice and thank his or her lucky stocks.

In the larger market picture, this is the kind of weakness that can be seen in many sectors. It is just easy to see here.

P.S. Once again, the LYFT chart is included as a cautionary tale to not buy unless an IPO takes out the high of its IPO day.

(click on the chart panel for a larger view)

Short Strangles on Stocks 9/16 -9/20

Short Strangles on Stocks 9/9 – 9/13

This week’s short strangles (see chart panel below):

Last week’s short strangles:

Results were for the week but during the week (and FB stopped out at breakeven):

CHART KEY: The number in the yellow flag on the lower right is the cost of the strangle. The number in the white flag on the lower right is the price gain on the position (a negative number on the shorts is a gain). The number in the green flag on the lower left of each chart in the panel is the percentage gain or loss on the price of the strangle (not accounting for margin needed for the position).

(click on chart for a larger view)

#OptionsStrategy – Stealing money with short strangles on stocks

If there is any way to consistently steal money in the market it might be short strangles on stocks.

That is: with persistence, experience and discipline.

For example last week’s strangles as posted on twitter:

The key is to select the price spreads between the puts and calls for the near Friday’s expiration at a measured distance. There are all kinds of number-crunching strategies for determining the options spread below and above the stock price (Tasty Trade Network is a good reference), but since I believe it is best to keep it simple, and since it’s only for a week, I just eyeball it.

If the stock closes the week between the price of the short put and the short call the short strangle expires worthless, basically a 100% gain.

Those gains stated in the tweet above are for the strangle change itself on the each stock with no consideration for the margin requirements on selling naked options. Needless to say the margins are high and may be prohibitive for most but, even with the high margins, there is three to five percent per week possible on short stock strangle trades and, also needless to say, three to five percent per week adds up over a year’s time.

This week’s strangles:

$SPY – dead cat or not, the open always matters…

MARKET TIMING SIGNALS FOR 7/18/2019.

Long-Term Breadth (the NYSI): Sell DAY 2
Short-Term Breadth (the NYMO): Buy DAY 1
Price: Buy DAY 1
Nifty-50-Stock-List: 17 BUYS, 9 NEW BUYS, 8 OVERBOUGHT; 32 SELLS, 2 NEW SELLS, 8 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 47, rising, NEUTRAL LEVEL.
Bellwether Stocks: 7 UP, 8 DOWN.

WHAT?

In yesterday’s post it was noted that:

“The market will go down until it doesn’t, and granted, that could be even as early as tomorrow. The VIX remains below 15, which is a bullish level indicating this is likely a pullback and not a serious correction.”

The is pretty much what happened with a gap down before recovering.

While all three of my end-of-the-day signals were on or went to sells on today’s open in options trading and day trading the open always matters.

See the charts below. Color-coding on the these TradeStation charts has been getting simpler and simpler.

Those trades were triggered by the open for each option. They are set for $10K in each trade (what I call the “10KDayTrade” on Twitter) only to make calculating the percentage gains and losses easier. So $10K in 296 call for Friday’s expiration made about $5,900 into the close on the black chart on the left and the brief trade in Friday’s 298 put on the blue chart to the right lost about $900 so the net today across both trades was about 50%.

WHAT NEXT?

Today’s recovery was enough to turn up the NYMO which is a cautious buy signal. I say “cautious” because long-term breadth is declining. Consequently, today’s turn could be a dead-cat bounce with the downward slide resuming in short order. It’s a trade worth taking with a tight, impatient stop — in other words for me it better go my way right away or I’m going away.

At same time, tomorrow’s open, like today’s, is going to matter in both options and day trading. As far as I’m concerned SPY options are always a day trade. Stocks are a different game. Based on today’s close, stocks on my bellwether list to watch for longs tomorrow are AAPL, FSLR, SHOP, TWLO, and NVDA while BABA, WYNN and QCOM may be shorts.

The open for each will tell the story.

(click on the charts below for a larger view)