#MarketTiming – Oversold and very close to a bounce…

MARKET TIMING SIGNALS FOR 5/13/2019.

Long-Term Breadth (NYSI): SELL FROM 5/6.
Short-Term Breadth (NYMO): SELL FROM 5/13.
Price: SELL FROM 5/13.
Nifty-50-Stock-List: 9 BUYS, 0 NEW BUYS, 2 OVERBOUGHT; 41 SELLS, 14 NEW SELLS, 30 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 32, FALLING, FEAR LEVEL.
Bellwether Stocks: 0 UP, 15 DOWN.

OF NOTE SPY OPTIONS:

In a very bearish trading environment, today was a put day (see post below) with the in-the-money at the open 284 put rocketing to a 144% gain at its peak and registering through a chop at the end of the day a 76% gain. That final gain is if one was not paying attention, but obviously there were profit taking points all during the day – as it gained 100%, coming off the top for 121%, selling on the first blue-bar sell signal for 90% (see the chart in the post below).

WHAT:

Today’s market action was again news driven as the US-China trade talks broke off Friday with Trump escalating the pressure with a jump in tariffs on many Chinese imports from 10% to 25%, then tweeting over the weekend several threats to make it worse.

Finally, China retaliated with $60B in tariffs on US products, most farm products in the heart of Trump’s voter support. Sixty billion is not that much on its face but in the scheme of things it was a sign China is not going to, as some Trump supporters were claiming, “bend a knee.”

With an all-out trade war getting closer and closer to a real possibility (don’t these guys ever read history?) it was inevitable the US market was going to take a big rip.

On a technical note, except for a one-day up blip on 5/3, the long-term breadth, as measured by the NYSI, has been been falling since 4/17 (see the red vertical line on the chart below). Since that time, the market managed to trudge higher but the indexes are all now below the level they were at when the NYSI turned down. In other words never bet against the NYSI. It sometimes takes a while but it most often wins in the end.

In a previous post on the this pullback, I said: “If the market focuses more and more on the Trump administration turmoil in Washington, it is likely to unstable for some time.” That still is the what’s what.

WHAT’S NEXT?

However, for now, it is time for a bounce. It may not come Tuesday (a “turnaround Tuesday”?) but it is very close by.

The market can go down as long as it wants but not forever.

At this point SPY is down seven of the past nine trading day, the nasdaq down eight of the last ten. Short-term breadth, the NYMO, is deeply oversold. VIX has moved from the “12s” to 20 in the same amount of time. It’s getting to be too far, too fast, which always leads to a quick bounce. Except for QCOM, all the bellwether stocks are sells and were flushed to oversold with big drops in the indexes today.

In addition, my nifty-50-stock-list has 41 stocks on sells and 30 individual stock on the list oversold. Forty or more on sells is oftentimes the beginning of the end, if not the end, of a downswing.

I’m not one for Fibonacci numbers because like all support and resistance indicators they are notable only as long as the market doesn’t slice right through them (which it often does), but they are sometimes fun to take a look at and right now it appears SPY is sitting on one on a retrace of the rally from December (see the chart below). Supposedly that’s as good a spot as any for a bounce to begin.

(click on the chart for a larger view)

$SPY – the slide from the top continues…

MARKET TIMING SIGNALS FOR 5/8/2019.

Long-Term Breadth (NYSI): SELL FROM 5/6.
Short-Term Breadth (NYMO): SELL FROM 5/6.
Price: SELL FROM 5/6.
Nifty-50-Stock-List: 18 BUYS, 3 NEW BUYS, 7 OVERBOUGHT; 32 SELLS, 1 NEW SELLS, 16 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 41, FALLING, FEAR LEVEL.
Bellwether Stocks: 5 UP, 10 DOWN.

OF NOTE SPY OPTIONS:

SPY CALLS AND PUTS, BOTH, were down on the day as a tight sideways chop all day slammed premium for Friday’s expiration on both sides of the market. (See the charts below for how bad it was.)

The most nimble of options traders could make money, at great risk, buying the yellows And selling the blues on the charts below, but not much. The not-so-nimble could lose a lot.

WHAT:

It appears the market has been moving on Trump tweets. That is as absurd as it can get since he should not be tweeting about any of this and the market shouldn’t be paying any attention to any thing he tweets. The New York Times broke a story on ten years of his tax returns during a time he lost more than a billion dollars, all of the money his father gave him a lot more. Surely, one of the worst businessmen in history but a major-league con-man. His beloved Twitter has hung #BillionDollarLoser on him.

If the market focuses more and more on the Trump administration turmoil in Washington, it is likely to unstable for some time.

WHAT’S NEXT?

All sell signals remain in place – as usual this is a market can can go down as long as it wants and turn up any time. That sharp drop in the calls and the rise in the puts in the last twenty minutes of the day on the 10-minute charts below may hint there is more downside to come right away tomorrow but news, like a trade deal with China, can intervene.

This is a dangerous time for short-term traders. On the longer term, every bear market begins (or resumes) on a single down day and that day was six days ago to start this current slide.

(click on the chart for a larger view)

$SPY – market tries to reverse Trump tariff sell-off

MARKET TIMING SIGNALS FOR 5/6/2019.

Long-Term Breadth (NYSI): SELL FROM 5/6.
Short-Term Breadth (NYMO): SELL FROM 5/6.
Price: SELL FROM 5/6.
Nifty-50-Stock-List: 27 BUYS, 4 NEW BUYS, 13 OVERBOUGHT; 23 SELLS, 11 NEW SELLS, 5 OVERSOLD.
CNN MONEY’S “Fear and Greed” Index: 56, FALLING, GREED LEVEL.
Bellwether Stocks: 1 UP, 14 DOWN.

OF NOTE SPY OPTIONS DAY TRADES:

SPY CALLS, 5/6 288 UP 71%, 290 UP 120%, 291 up 190%. No put trades.

OF NOTE
:
Fourteen of the bellwether stocks (AAPL, TSLA, NFLX, TWLO, AMD, NVDA, QCOM, GS, GOOGL, BABA, MSFT, FB, FSLR, AMZN) were up from the open although down on the day; and one (WYNN) was both down for the day and down more from its open.

WHAT:

The futures market sold off hard overnight on the news Trump threatened new tariffs on Chinese imports, then rebounded immediately at the open on the news that the Chinese negotiators planned to come to the U.S. to talk as planned anyway. The market was poised to go higher, prior to Trump’s announcement but the news cut short the buy signals across the board on Friday’s gains.

Can’t do anything about news, either positive or negative, except to go with the flow as it unfolds – in this case for day and swing traders it was a buy on today’s open and turned out to be quite a remarkable bounce back. Fourteen of the bellwether stocks were up from the open despite remaining down for the day. The $10K day trading system, had today’s 290 calls (in the money, ten minutes into the market) up 120% or the day, and just out of the money 291 call up 190%.

WHAT’S NEXT?

All technical signals I follow gave sell signals today for tomorrow open as the one-day blip up in long-term breadth ($NYSI) Friday retreated today on the tumble in short-term breadth ($NYMO); the price buy for today’s open, which racked up 4.5% on TQQQ and 3.7% on UPRO on the close, will be a sell on tomorrow’s open. In addition, CNN’s Fear and Greed Index dipped today while still at a greed level, and volatility surged (VIX), both negatives for the market.

Sell signals are sell signals but what’s next is tricky given the velocity of today’s rebound (see the candle on the SPY chart below), but it did not quite reverse completely and it may have used up immediate buying power to get to where it got on the close. If so, chances are it reverses again to the downside tomorrow. The key will be play the open, preferably with either calls or puts, while looking to lock in profits on today’s gains on TQQQ and UPRO and any of the bellwether stocks.

(click on the chart for a larger view)

#MarketTiming Signals

THE SIGNALS AS OF 4/8/19.
Long-Term Breadth (NYSI): BUY FROM 4/1.
Short-Term Breadth (NYMO): SELL FROM 4/8.
Price: BUY TQQQ FROM 4/1 UP 6.2%; UPRO FROM 4/1 UP 4.3%; TNA FROM 4/1 UP 5.4%
Nifty-50-Stock-List: 20 BUYS, 1 NEW BUY, 10 OVERBOUGHT; 30 SELLS, 7 NEW SELLS, 8 OVERSOLD.
CNN “Fear and Greed” Index: 74, GREED LEVEL.
Bellwether Stocks: 9 UP, 8 DOWN.

OF NOTE:
$10K Swing Trade SPY options: 282 APRIL IN-THE-MONEY CALL UP 59.2%; 284 APRIL AT-THE-MONEY CALL UP 75.2%.

See charts below.

$10K Swing Trade Stocks: WYNN is up 22.4% from 3/29; FSLR is up 8.4% from its price buy signal 3/29; AMD was a sell on today’s close up 8.2% from its price buy 4/1.

WHAT’S NEXT?
The SPY is up eight days in a row and the NYMO turned down today. Seen that many times before. There is a profit-taking dip coming…any day, any hour, any minute. But as long as the NYMO and/or NYSI remain positive overall the play is to be long, take profits when the stocks give sell signals, and buy coming out of dips.

However, for now, AAPL is up nine days in a row, which is reminiscent of previous runs in the bull market in which AAPL almost single-handed dragged the market indexes higher. It closed today at 200 and has a market-cap again approaching $1 trillion. The company has lots of cash and is no doubt buying back its stock again. That’s great for those who buy and hold but one day the buy-backs will end. A trillion dollar market-cap is not a jumping-in point to go much higher. On the last swoon, the stock dropped into the 140s, a great place to get back in after either taking profits shorting the stock above $200. For swing traders, doesn’t it seem obvious the selling or shorting opportunity knocks again?

(click on the charts for a larger view)

$SPY – six days up into a black candle

Does the market pause here, pull back, or continue to rally?

My bias going into Friday is a pause, possibly going into a pull back.

But, thanks to SPY rising six days in a row, putting a black candle on the price chart and an inside day today (see the chart below), it’s going to be easy to see the next move, either up or down. Every black candle, which I simply define as a day in which the close is higher than the day before and lower than its open, is a clear sign of indecision in the market and an inside day is a further indication of indecision. The indecision obviously is resolved above the high or below the low of the black candle day. It’s that simple.

At the moment, the key numbers on SPY are 287.76 at the high and 285.75 at the low.

Of course it takes a down day to start a decline and SPY, at six days up, has not had one but the Nasdaq Comp, after five days up in a row, was down slightly today and there were eighteen sell signals today on my nifty-50 stock list, CNN’s Fear and Greed Index is overbought in the greed zone… All of which contribute to my bias.

On the other hand, long-term breadth (NYSI) continues to rise, short-term breadth (NYMO) also is positive so it’s likely, when and if it comes, the dip will be more of a pause than a deep pullback.

In the meantime, it might be time for swing traders to tighten stops to lock in profits. It’s been a good upside run this week with TQQQ up 3.8%, TNA, up 3.1% and UPRO up 2.5% at today’s close.

Among the bellwether stocks FB is up 4.9 %, FSLR up 3.9%; AAPL lagging but up 2.1% (watching for a short soon); remarkably WYNN is up 13.1% and AMD up 10.4% and GS up 4.2% and BAC up 4.5% at today’s close. All of these are four day trades from the market-timing buy signal on the open Monday.

(click on the chart for larger view)

#MarketTiming – Bulls doing what they needed to do

What they needed to do was to push the market up some more.

In the process, the all important long-term breadth (the NYSI) has turned positive to go along with the short-term breadth (the NYMO) and price indicators with SPY finally edging above its 280/282 resistance (see the charts below).

That would suggest more advance to come. The upturn in the NYSI is buy signal for tomorrow’s open

But maybe not without a dip first, a “turnaround Tuesday”?

There are shaky signs that remain in this tricky time in the market. It’s kind of scary to jump in now with the market already up essentially six days in a row, both the Russell and the Dow at at the moment lagging the Nasdaq and the SPX as if not all the generals are as yet on the battlefield. My nifty-50 stock list has 29 stocks on buys and has been declining since last week, even slipping again today from 31 on buys Friday. CNN’s Fear and Greed Index is at a “greed” level and still working on divergence trailing the market’s up move these last six days.

Still, at this point there is no choice other than to be long until further notice.

Given that the NYMO/NYSI is positive and also has a cycle that usually runs ten to fourteen weeks (the sell down ending six trading days ago was in the 10th week) breadth could launch the market into rally into say…May…and maybe making a new high along the way.

I’ve been asked to explain what’s on the the triptych of stock charts below. They are an illustration of what I talk about over and over again as I try over and over again to simplify, simplify, simplify.

The top part is whatever is being traded on the signals. In this case TQQQ. Could be AAPL, GE, NFLX, options, whatever. The middle part is NYMO and NYSI. The next lower part is obviously SPY. Also use the Nasdaq composite here on other charts. And finally the bottom part is the profit reading, set for $100,000 in order to easily see the percentage move. The white flag on the lower left is the booked profit percentage on the signal year to date. The white flag on the lower right is the current profits if the signal is in play.

The chart on the left is the short-term breadth signal for March, in the middle is a pure price signal for March, and on the right is the long-term breadth chart, YTD (it is set to go long again tomorrow).

Remember this is day trading and swing trading, no long-term buy and hold in my world (far too risky).

(click on the charts for a larger view)

#DayTrading stock options in the “Fool’s Game”

Let’s call this a “Fool’s Game” trilogy.

Three days experimenting with buying calls or puts (calls in this instance) according to the rules of the “Fool’s Game” suggested here for day trading SPY options on a lucky November 13th last year in this link: IS It A FOOL’S GAME?.

The basis of the entire strategy is the simplicity of going long calls or puts (what’s been called the “fool’s game”). The cost is clear since it is simply the cost of the option itself with no shorting margin requirements, no covered stock scenarios, no spreads or complicated attempts to calculate delta and neutralize theta and try to fill the four legs of iron condors both going in and trying to get, and no more god knows what else…

This is this simple: buy calls if you believe it’s going up, puts if you think it’s going down.

The results trading SPY options, either in the money or at the money on the nearest expiration — Monday, Wednesday, Friday. were astounding last year, and earlier this year (that system is currently experiencing its biggest draw down since I began tracking and trading it). Both because of the “astounding” and the “biggest draw down”, I decided to take a look at stocks using the same criteria as outlined in this link: DayTrading Stock Options two days ago.

The criteria for selecting AAPL, FB, BABA, NFLX and TSLA for the trades is noted in that link.

The first day of this experiment, Tuesday this week, netted 13.2% in trades that triggered in all five of those stocks (I highlighted TSLA on a chart in a post below), and netted 37% on trades is four of the stocks yesterday (see charts in the post below). FB options did not trigger a trade that day.

Very fine returns for the system, and much to be learned in its context.

Today (see the muddle of charts below), the trades in calls lost 8% on options traded on four of the stocks.

Still, a good three days overall.

But as I mentioned there was much to learned in context – a logical intraday stop on the NFLX trade (the first blue candle as seen on the NFLX chart below), would have cut the total loss to only 3%. Stops, needless to say, like with all systems, need constant examination and re-examination.

I looked into this because I’d been told day trading stock options can’t be done. This week may be an outlier but as far as this “trilogy” of day trades has gone, it has been done.

(click on the chart for a larger view)

$SPY – it doesn’t even rhyme, it repeats?

History…

Back in December there was this post:

$SPY – Simple black candle tops…

In which it was noted:

Again and again, market upswings end in black candles – a hanging man, a shooting star, a dreaded doji, or just a sign after six days up and two blasts of nothing-much news the buyers get tired. Not always it’s a black candle ends the rally, but it happens often enough, me thinks, for swing traders to take notice.

And it was further noted going into that December black candle:

“If I had to guess, I’d pick the 281 neighborhood as a place where the SPY may settle this trip up (see the chart). Maybe even a bit higher. It may not take long or it may chop up until January. After that all indications are we have not seen the eventual lows of this bear.

The December black candle (see the chart below) started the plunge into the December 26th buy signal from which we have rallied again to…you guessed it…280 on the SPY! Lots of traveling around in the market to go almost no where. Swing traders love this — after all what a rally! Long-term holders must sit grateful that it’s not as bad as it was…but is it going to get any better for them?

Well, we’ll see. Like last time we were here, there are again simple black candles everywhere: besides SPY (the chart below), and QQQ they are in a slew of ETFs – TAN, FAS, SOXL, FNGU, TNA, TQQQ, UPRO — as well as DB and C in the banks and no less than eight staring me in the face in my nifty-50 stock list (that a lot for a single pattern all at once).

So what’s it mean? Maybe nothing since all-important long-term breadth continues to rise, but then short-term breadth (measured by the McClellan Oscillator, $NYMO), continues to wind down (see the lower portion of the chart below), giving warning signs of a turn to the downside coming near. To keep it simple, let me say it will not surprise me if a dip starts Tuesday and goes down a while.

(click on the chart for a larger view)

#MarijuanaStocks – gains are high in the weed patch

The vast majority of stocks move with the market. And some stocks move more than others, both up and down.

Take the marijuana stocks as the prime example.

At what may have been the end of the bull market last August, this newcomer stock sector was leading the market (a telling sign the bull was getting too high) and with the fall in the Fall, its stocks all went down together.

Even the sector’s leaders took a drubbing CGC, which Constellation Brands had just put a ton of investment money into, dropped from a high of $59 to a recent low of $24. TLRY, an extremely hot IPO screamed crazily from its IPO price close of $22 to a high of $300 in two months (its founder may have been the fourth richest man in the world for one day…on weed) and then plunged to an almost still respectable low of $70.

What fundamentally changed at those companies in the three months the market sold off and took them down? No much, if anything at all.

So coming into the market bottom, that was an obvious vibrant sector that needed to be watched for a big bounce.

And, indeed, the marijuana stocks have not disappointed any swing traders looking to make bear-market rally plays (see the chart panel below). Since the December 26th blog buy signal here, CGC has rocketed 52%, CRON 27%, GWPH 31%, ACB 37%, and TLRY had gained 37% until it was knocked down to a “mere” 13% gain in today’s action.

That hit on TLRY today is why I bring all this up now.

There is speculation TLRY’s drop was caused by fear that an expiration of the lock-up period on IPO insiders would bring on selling, a self-fulfilling prophesy if ever there was one but then most moves in the market usually are. With the exception of GWPH, the granddaddy stock in the sector, the rest of the stocks took hits in one way or another today along with TLRY.

It was on some news, profit-taking, whatever, but it was a hit in the leading sector on a market up day. That is an alert.

In the blog post below the suggestion was and still is to play defense, defense, defense during this rapid rise in the market because of the likelihood this is a bear-market bounce that can go ragged at any moment, and in some sectors die on a dime.

Bull markets end and bear markets begin on one down day. And sector rallies do the same.

Today may or may not be the end-of-the-swing day in the weed patch, but it turns out to be, as we used to say in the 60s and 70s and the bear can growl now: “Don’t bogart that joint, my friend.”

(click on the chart panel for a larger view)

Oops! $SPY rallies again into a black candle top

Okay, another day up as the rally keeps going, but…

But there are now simple black candles everywhere.

Back on December 3rd I started looking at black candles on StockCharts.com just for the fun of it and discovered a simple black candle at that point on the SPY might be the top of that up swing.

I wrote about it and posted the comments and a chart here:

$SPY – Simple Black Candle Tops

As it turned out it was the exact top of the late November market bounce. Given that it is believed that it is impossible to consistently call tops in the market, that might have been pure luck. However, looking back over many charts (see those below for examples) those black candles appear to be telling. Just focus on the black arrows on the day after, and the moves from there in the current environment.

In Japanese candlestick charting there are names for these patterns — dojis, shooting stars, abandoned babies, etc. — but I’m trying to be as simple as simple can be. The black candles I’m talking about here occur when an index/ETF/stock/future closes higher than the close the day before but also closes below its open (again see the charts below), oftentimes on a gap higher than the high the day before.

However, as with all technical and price indicators, nothing matters unless there is follow through the next day or very soon thereafter. December 3rd signaled the drop from the top of a range in the newly-born bear market (see the first chart below).

There was money to be made on that decline just as there was on the subsequent bounce off the bottom. This is swing trading.

The general market has had a nine-day bear-market rally off the low. For many ETFs and stocks there have been spectacular gains which I noted here (the post below, yesterday) but now….

Now we are back to simple back candles at the top of more than one ETF: not only SPY, but also QQQ, and in the sectors, LABU, ERX, FNGU, TAN, FAS. These I’ve charted (see the panel below the SPY chart) but these black candles are all over other ETFs and many stock charts besides.

This may be a turning point. It may not. But like all great things in the stock market we won’t have to wait long to find out.

(Click on the charts for a larger view)