$SPY – the fool’s game’s not foolin’ for 79% on the day trade

THE FOOL’S GAME – BUYING CALLS AND PUTS FOR DAY TRADES

After SPY’S opening gap, it was very trying trading in the early action as the ETF whipsawed back and forth across its open.

The market’s first ninety minutes chopped out two short signals and two long signals before settling into an downward trend for the rest of the day.

That slide into the close saved the trade for the day. After an initial draw down of $1500 (on a $10K buy-in on each trade), the overall net at the close was $7,900 for the day (or 79%) trading the weekly calls and puts (see the chart below for an illustration). Instead of saying the drop from 8 a.m. (PST) into the close “saved” the day, I guess it would be more apt to say it made the day-trade with this system once again great for the day.

I have upped the ante on what I talk about here from buying $5K worth per trade to $10K worth for each trade simply because it’s easier to talk about percentage gains and losses using that level. The SPY is best for this kind of options day trading because of the liquidity in both the weekly and the monthly strikes. The action today was in this week’s 266 calls with a volume today of more than 63,000 contracts and this week’s 267 puts with a volume today of more than 9,000 contracts, both were in the money contracts (that volume may be skewed by the fact this week’s expiration Friday is also a monthly expiration). Size ranged from 72 to 90 contracts per trade.

With $10 in the trade, it’s also fun to say on good days like today — Made $7900 today with my 10 grand in the market and now I’m flat with no overnight risk! What a fool am I?!

(click on the chart for a larger view)

REMINDER: The commentary presented here is for entertainment purposes only and should not be construed in any way as direct investing or trading advice.

$TQQQ – a Nasdaq bloodbath too far too fast?

TQQQ, the 3x-leverage ETF based on the Nasdaq 100 stocks (NDX), was down 5.4% today, a bloodbath that affected many of the bellwether Nasdaq stocks in the index.

See the table below:

(click on the image for a larger view)

NVDA down 14 points, NFLX down 11, and so on. Pretty ugly in the momentum bellwethers.

There was a fake-out nudge to the upside Tuesday, but can’t say today’s slam down was unexpected. Posted this two days ago:

This could be tricky since long-term breadth continues to climb (up for the fourth day). Given that, if short-term breadth turns up here in the next day or two (or bless a bottom dollar, three days), the market would get another bullish boost. If long-term breadth turns down, this could very easily become the hook that catches every bull off guard. Although the bull market has so far defied the signs over and over again, it is inevitable that one of these times, like today, when the signals signal a turn, the turn will come. Probably when the bears are worn out and the bulls don’t expect anything of on their blindside.

If today’s sell off continues, that will be relevant, but there are signs this is done already.

Nearly every time TQQQ falls through the standard deviation lines (the blocks on the green lines on the chart below), the Nasdaq bounces the next day or two days out (the red vertical lines on the chart). It is as if any fall this far is too far too fast. And oftentimes in this bull market, the bounce becomes another rally (see the diamonds on the chart are TQQQ). In fact, a look-black on the chart shows this last great upswing in the Nasdaq, which began in late September, started with a touch down on the green lines just like today.

So I’m looking for the bounce, and looking to ride a rally if it develops here (Santa time?), and if it doesn’t then the suggestion in the quote above might indeed be a sea change in the market.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Buy (Day 6).

PRICE: Sell. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 1).
VOLATILITY: Sell, (Day 1).

CONTEXT:

SPY CLOSE – 262.31
QQQ CLOSE – 153.89
CNN MONEY’S FEAR AND GREED INDEX: (67, rising, greed level).
NIFTY-50 STOCK LIST: 14 Buys; 11 Overbought, 8 Oversold, 6 new buys today, 3 new sells.

(click on the chart for a larger view)

$SBGL (TRADE UPDATE) – up 9.4% in 4 days…

SBGL, long from 11/21 at 5.09, has had a nice four day run to the upside to close-by resistance.

SBGL – START OF THE TRADE

At the same time the leveraged gold-stock ETF, NUGT, has move up to the top of its recent range (see the chart below). Would like to see a breakout in order to take SBGL above 5.65. It closed today at 5.57.

In the meantime, moving the stop on half the position to 5.42, and to breakeven on the other half.

(click on the chart for a larger view)

#MarketTiming – Swing signals swing again…

Yesterday my swing signals for Price, Breadth and Volatility were all on sells. The market went up. Today the signals (see below) have swung again to buys. Across the board.

I’m assuming the market is going up tomorrow.

But the indexes are overbought and the internals are falling apart. Something has to give, sometime…

Sometime, needless to say, is an awfully vague term.

If this sounds like I have no confidence in these signals I don’t intend it to. They are reliable for swing trading. XIV, for instance, is up 67% year-to-date on the Price signal, up 55% on the breadth signal and 80% on the volatility signal (appropriately). See the chart panel below – from left to right Price, Breadth, Volatility.

It’s the market, at this point, going up and up and up relentlessly that bothers me. We’ve seen this before and it’s great while it lasts but it is not, in the end, going to be different this time.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 17).

PRICE: Buy. (Day 1).
SHORT-TERM BREADTH: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).

CONTEXT:

SPY CLOSE – 259.11
QQQ CLOSE – 176.24
CNN MONEY’S FEAR AND GREED INDEX: (54, falling, neutral level).
NIFTY-50 STOCK LIST: 23 Buys; 11 Overbought, 6 Oversold, 5 new buys today, 7 new sells.

(click on the chart panel for a larger view)

$SPY – Three days in the “fool’s game” for 100%

I have been posting these BUYING SPY options trades for three days now, Friday, Monday and Today, buying against the common wisdom that buying options is essentially a fool’s game.

FRIDAY – A “FOOL’S GAME”? NOT!

MONDAY – BUY CALLS FOR A RINSE AND REPEAT

Friday and Monday were “call” days, today was a put day. These are the weekly in-the-money options expiring each Friday. Each buy signal is a $5000 buy-in with up to five trades a day for no more in on any day than $25,000 at once (there were only four signals today). These are all day trades, which is the point.

As I proposed in the link: SPY options are ideal for day trading — very liquid across multiple strikes, tight spreads, hardly any time decay on a trade for only a day, a stop-loss is close by and immediate, and the profits, if there is trend for the day, can be substantial, even rather astounding.

I suppose “astounding” is a relative term and every person defines it differently but…

This is how I’m defining it today — these trades in these three days are now up a shade more than 100%.

That’s largely thanks to the “astounding” 80% move on last Friday’s expiring call. And I suppose the last two days for 12% each are more typical.

But there’s more to this if one takes a look inside the trade (without going crazy — easy to do…). For instance, today first three signals were up $8000 at their peak and there was a possible and reasonable sell at up $6000 as opposed to the mechanical close at $2450. There were moments like that every one of the days. Options after all as volatile trading products. Could have been much more than 100% on any one of them…and of course there buying out-of-the-money instead of in-the-money for more bang for the buck but this is when option trading begins to go insane so I’ll just quit talking about the might-have-beens. The what-is remains north of 100% in three days.

As I’ve said in the links above the key is any entry signal with which a trader is comfortable (see the chart below or those in the links above).

By the way, I’ve had discussions on a couple of forums in which it has been suggested that ES futures would be a more efficient and much better way to take these day trades, give the futures’ liquidity, tight spreads and lack of time decay. While that seems logical and even appears to be obvious, as far as day trading goes that is, so far, simply not true. ES futures have under-performed the weekly SPY options on these day trades. For one example the SPY Puts today netted 12% while the ES futures, at an equal level of commitment using day-trading margin, were flat on the same signals.

(click on the chart for a larger view)

A REMINDER: These posts are solely for entertainment purposes. They are a journal of my thoughts on the market and should not be construed in any way as direct or indirect investment or trading advice.

$SPY – beginning another hard up leg…

The general market continued higher again today.

Interesting one-day moves in the top five stocks on my Nifty-50 stock list: TAL up 5.2%, WTW up 10.2%, EDU up 7.9%, PODO up .58%, and FSLR up 3.2%. All in all, 36 of the stocks on the list advanced.

Long-term breadth is still declining but it often lags a market move as short-term breadth begins to give glimmers of a blast to the upside (see the green circles on the rising lows on the chart below).

This is a bull market that just keeps charging, and will apparently until it doesn’t anymore.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 15).

PRICE: Buy. (Day 2).
SHORT-TERM BREADTH: Buy. (Day 1).
VOLATILITY: Sell, (Day 1).

CONTEXT:

SPY CLOSE – 258.85
QQQ CLOSE – 153.79
CNN MONEY’S FEAR AND GREED INDEX: (69 rising, greed level).
NIFTY-50 STOCK LIST: 28 Buys; 12 Overbought, 7 Oversold, 12 new buys today, 5 new sells.

(click on the chart for a larger view)

#CoalStocks – thinking about shorting BTU, CLD…again.

Just thinking about it. This is a heads up. Don’t quite have the triggers I’d be comfortable with yet.

But unless the stocks surprise further to the upside, the prospects for shorting them again are getting closer day by day.

These stocks have been rallying in recent months on the desperate hope President Trump will do something to revive the industry. There is no chance of that happening. He is paying lip service, but is hardly interested or able to do anything else. Remember these stocks, long term, have fallen faster than dead canaries. This is an industry slammed by cheaper cleaner natural gas and it is facing an inevitable death at the hands of renewable energy.

CLD, once the stock dropped below $5 a share, could easily fade to dead money around $1, and maybe even go off the board like so many others in this sector – Patriot Coal, Walter Energy… BTU has already been through a bankruptcy, taking out decades of shareholder equity, and now has restructured and emerged to try to do it again.

I’m not one for fundamentals but this industry blow happened just yesterday:

LAST COAL PORT PROPOSAL ON THE WEST COAST DIES

Businessmen, especially coal executives, always complain that environmentalists never let them do anything. That is not true. Environmentalists don’t let them do stupid things. All of coal, once an evil necessity, is now a stupid thing.

So, trading-wise, I’m looking for more signs of weakness, negative candles, breaking supports, indicator divergences before sealing the shafts (see the charts below). Call it waiting for the bloom to come off the black Trump rose.

(click on each chart for a larger view)

All information, presentations and discussions on this site are no more than a journal of my personal stock market thinking and trading. This site is for entertainment purposes alone, and nothing here is to be construed in any way as direct investment advice.

#MarketPerspective – waiting for the Fed…

Given how strong the trend is at the moment, the only thing that could kill this stock market rally is the Federal Reserve… Oh, yeah, Wednesday is the “Fed Day.”

So is the Fed going to kill it? It would take a drastic rate increase maybe, or a statement that the sky is falling. And even then, given how this Bull has shucked off every lance it takes, even a drastic something or other might not do it.

I suspect once the Fed suspense is over, either in the aftermath of the meeting announcement Wednesday or Thursday, QQQ is going to vault past its two weeks of resistance at about 146.59 (see chart below) and run like a bull enraged. Needless to say, if that happens, it will take everything in the market with it. SPY has already limped on up.

What I’ve just said is the old market adage: “the trend is your friend.”

Now what if is isn’t, or we are at the end of it?

It is as if the market has been chopping sideways for a couple of weeks just waiting. My nifty-fifty stock list has just registered 25 buys and 25 sells for two days in a row as if completely confused as to which way to go. Going into the Wednesday’s Fed Day, two of my three swing signals are on sells – short-term breath and volatility – but swing price and the most important long-term breadth buys are still in place. Beyond the technical signals, there are many signs that this bull is vulnerable – NYSE margin debt alone at its astronomical level beyond 2000 and 2007 should be making everyone’s hair fall out. CNN Money’s Fear and Greed Index is at an extreme greed level and could turn at any time. Margin debt and fear can feed on themselves and when then do nothing can stop them.

And I’ve just saw a sentiment survey that says retail investors have never been so bullish. In the rhyming of market history that is not good, they always get screwed in the end.

Geez, it’s still a bull market but like all bull markets it doesn’t make it easy. It’s not like anyone want it all left up to the Fed.

SWING TRADING SIGNALS:

PRICE: Buy. (Day 3).
SHORT-TERM BREADTH: Sell. (Day 2).
VOLATILITY: Sell, (Day 1).

CONTEXT:

LONG-TERM BREADTH: Buy (Day 17).
CNN MONEY’S FEAR AND GREED INDEX: (81 rising, extreme greed level).
NIFTY-50 STOCK LIST: 25 Buys; 13 Overbought, 7 Oversold, 4 new buys today, 3 new sells.

Stocks meeting the criteria for a 5-minute on the open Wednesday: only FB.

(click on the chart for a larger view)

$KBE – Are these banks or the walking dead?

Long-term market breadth has been rising for nine days.  That usually takes most stocks in the same direction.  After all, if a stock isn’t rallying when it has the entire market on its side, when is it going to rally?

So, consider the banking sector…

JPM, BAC, GS, WFC, DB, KBE (the ETF for the sector) are all falling while breadth is positive (see the rising green in the middle of each chart below), and now all of these stocks have broken support falling out of their respective consolidations (see the blue boxes on the charts below).

Don’t those boxes look a lot like coffins?  So is this out of the coffin and into the grave like “out of the frying pan and into the fire”?

Enough fiddling around.

If you’re a bull this is not a sector you want to see lagging, let along falling apart.  So here’s the heads-up, they’re likely going down.

(click on the chart for a larger view)