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)

#MarketTiming – Some notes on the NYSI

MARKET TIMING SIGNALS FOR 8/22/2019.

Long-Term Breadth (the NYSI): Sell DAY 3
Short-Term Breadth (the NYMO): Sell DAY 1
Price (the Nasdaq COMP): Sell DAY 1
Volatility (the VIX): Sell Day 1
Nifty-50-Stock-List: 19 BUYS, 8 NEW BUYS, 4 OVERBOUGHT; 31 SELLS, 4 NEW SELLS, 17 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 16, Falling, EXTREME FEAR LEVEL.
Bellwether Stocks: 12 UP, 3 DOWN.

WHAT?

Going into the end of the week last week the market looked ready to rally strongly but Trump tweeted again and China talked and that was that as the Dow swooned nearly 700 points on Friday.

Despite what the nincompoop in the Oval Office has to say, trade wars are not easy. Here’s an assessment of that — THE COST OF A TRUMP TWEET.

Needless to say, when stuff like this holds sway the market has become absurd. But even in the midst of this news and dribble-driven market technical indicators, though inconsistent for a day or two, in the end will again stabilize and win out.

Let’s take long-term breadth, the all-important NYSI, as an example. Formulated by Sherman and Marian McClellan is the long-term measure of the McClellan Oscillator (the NYMO) registering gyrations on the NYSE advance/decline line. It is pretty much the broadest measure of mass market psychology and direction.

Except for a “ledge” at the very end of July (ledges are made to fall off of) and a couple of blips up last week when the market wanted to rally the NYSI has been falling since July 17th. As one focuses on the day to day moves in the market, it is often easy to overlook the longer term when breadth is is bearish so I thought I’d take a quick look back at NYSI’s damage on much of the market in the last month or so.

See the ETFs and stocks in the chart panel below for illustration.

Since the NYSI July 17th turn down, a little more than a month ago, TQQQ, the Nasdaq 3x-leveraged ETF has declined 12.5%; TNA, the Russell small-cap 3x-leveraged ETF has fallen 18.8%. Among notable bellwether stocks on my list FB is down 9.3%, AMZN down 10.9%, TSLA down 16%, NFLX 9%, GS 6.8%, and WYNN a whopping 22.9%.

Obviously, the NYSI is a powerful read on market direction, both on the upside, and now on the downside, and most stocks follow the general market.

When it’s falling be short or be in cash. And long term investors should resist “bargains” and wait for the turn before initiating new positions.

In other words, don’t fight it.

WHAT NEXT?

With short-term breadth turning down today with a high below a high in negative territory (see the second chart below), that is a renewed sell signal so the expectation is the market goes down tomorrow and maybe the rest of the week.

But who knows for sure these days? Some fools might think they hear a positive tweet, or China playing its own game may stand by and let the market bounce.

(click on the chart panel or a larger view)

(click on chart for a larger view)

$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)

#MarketTiming – Long-term breadth says sell the rally

MARKET TIMING SIGNALS FOR 7/18/2019.

Long-Term Breadth (NYSI): Sell DAY 1
Short-Term Breadth (NYMO): Sell DAY 3
Price: Sell DAY 2
Nifty-50-Stock-List: 13 BUYS, 1 NEW BUYS, 4 OVERBOUGHT; 37 SELLS, 11 NEW SELLS, 12 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 46, falling, NEUTRAL LEVEL.
Bellwether Stocks: 6 UP, 9 DOWN.

WHAT?

The market took the tumble that been brewing for the past couple of days.

First short-term breadth turned down after a sequence of highs below highs, then price triggered a sell on today’s open, and now long-term breadth has given a sell signal for tomorrow’s open.

That last part is the most significant. Long-term breadth (the NYSI) is the primary context behind the entire market. If it is going up the bulls have the ball, if it is going down the market will tumble too. Maybe not right away — it can whipsaw like anything else, but if it keeps going down most stocks will follow.

Technically the sell signals are on tomorrow’s open but at today’s close this upswing, which began on the open of 6/28 (13 trading days ago), took TQQQ up 8.2%, UPRO up 5.1%, FNGU (the FANG ETF) up 12.4% and TNA remarkably was flat. Among notable stocks TSLA advanced 15.1%, SHOP 7.3%, TWLO 6.1%, WYNN 99%, FB 5.9% and AAPL lagged at up 2.3%.

The Nifty-50-stock-list was a mixed bag with as many stock down double digits as those up double digits. In retrospect that was probably a read on the raggedness of the rally.

However, INS, the number-one stock on the list coming into the upswing vaulted a spectacular 49.4%.

Interesting to note the divergence that registered on the overbought Fear-and-Greed Index, kept by CNN Money, called the exact top two days ago in SPY and in QQQ (see the chart below) and was telling across the board.

WHAT NEXT?

With the NYSI declining, one can only assume swing traders will be looking for short entries, options traders playing puts predominantly (see the post below), and long-term investors should tighten stops to their individual risk tolerance or just hold their breath and hope not to die.

Of note: NFLX after the bell reported earnings, a shortfall in expected subscriptions, and is getting clobbered in overnight trading. That may set a tone for trading tomorrow. Intriguing how often news comes along from somewhere to agree with the NYMO/NYSI breadth indicators.

Nothing much more to say. 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.

(click on the Fear-and-Greed chart below for a larger view)

#MarketTiming – slog to a stall…or a yawn?

MARKET TIMING SIGNALS FOR 7/17/2019.

Long-Term Breadth (NYSI): BUY DAY 13
Short-Term Breadth (NYMO): Sell DAY 2
Price: Sell DAY 1
Nifty-50-Stock-List: 23 BUYS, 10 NEW BUYS, 9 OVERBOUGHT; 27 SELLS, 7 NEW SELLS, 7 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 55, falling, NEUTRAL LEVEL.
Bellwether Stocks: 6 UP, 9 DOWN.

WHAT?

The general market stalled today, with small down day in almost everything – SPY, QQQ, the DOW.

Now the question will be, as suggested in yesterday’s post, is this little-bitty down the reversal day Trader Vic Sperandeo says can end an intermediate uptrend. Probably not, but it will not surprise me if one of these days this rally this year falls apart catching everyone in a yawn.

There was a good play in the SPY 301 at-the-money put (SPY opened at 300.65), expiring tomorrow, up 73%, but it was a wild chop for anyone who got it (I didn’t, probably because I was yawning too much).

WHAT NEXT?

On the three end-of-day signals I follow on TQQQ (see charts below), short-term breadth sold on the open today, my price system set up for a sell on the open tomorrow (buy the yellow, sell the blue), leaving only the all-important long-term breadth still long (the chart on the right).

The NYMO will have to drop through the zero line (the black line in the middle of the chart). Today it closed by my measure at 15 and appears to be working its way into a sell but what appears often disappears before triggering a real sell signal.

So for a true change of trend, it is still wait and see and be long in the meantime.

(click on the chart panel for a larger view)

$SPY – Federal Reserve gives the market a yawn

MARKET TIMING SIGNALS FOR 6/19/2019.

Long-Term Breadth (NYSI): BUY DAY 12
Short-Term Breadth (NYMO): BUY DAY 3
Price: BUY DAY 3
Nifty-50-Stock-List: 33 BUYS, 5 NEW BUYS, 26 OVERBOUGHT; 17 SELLS, 6 NEW SELLS, 2 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 43, falling, FEAR LEVEL.
Bellwether Stocks: 13 UP, 2 DOWN.

WHAT?

All in all a pretty boring day in the market.

FED left interest rates unchanged, but suggested rates may be cut later in the year. Reportedly the vote, was eight to sit, eight to cut, one to raise.

Tweeted this early in the day and it pretty much held true all the way to the close:

WHAT NEXT?

As long as the NYSI keeps rising, the market context remains bullish.

Yawn.

#IPOs – hanging in and moving on…

Updating the chart discussed in this link:

IPOS – A Great Year for “Dummies”

Particularly BYND (again) and PINS, rallying again over the high of its IPO day after being stopped out a couple of times at that high.

(CLICK ON THE CHART PANEL FOR A LARGER VIEW)

#MarketTiming – tracks of the bear?

Sometimes, as they say, it’s not a stock market, it’s a market of stocks:

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

(Click on the chart to see the full twitter thread)

$LYFT gets no lift on first earning report since IPO

LYFT, the ride-share biggie, is a perfect example of not buying into the hype surrounding an IPO.

LYFT came public on 3/29 and dropped almost immediately in on its opening bar, then gaped down the next day (see the charts below). Eventually, it settle down to move sideways until…today. It’s earnings report was terrible, losing $9 a share, more than a billion dollars, despite an increase in revenue and market share. And it had to announce on a day when its drivers are on strike with its biggest competitor coming public Friday.

The stock dropped nearly 11%

If one is an investor, none of this should matter. As outlined in this link below, investors should not even be long the stock until all fundamental and technical finally shake out, if they ever do. (Keep all this in mind also for the upcoming UBER IPO.)


Buying IPOs For Dummies

These IPOs are difficult to short in the initial stages, but traders on biggies like LYFT have options to play with. LYFT’s options came to market five days after the stock’s IPO day (see the charts below). And there is where the downside can be played. The LYFT May monthly 75 puts bought on its own “IPO day”, using the same criteria outlined for the stock in the link above,is now up approximately 150%.

Now that is uplifting.

(click on the chart for a larger view)