#MarketTiming – long, strong and more to come

Didn’t getting around to posting the timing signals last week for various personal reasons so this post probably looks a little late to the party.

Oh, well…

A lot related to the headline above has already happened. The Nasdaq is already up six days in a row and the SPY, except for a minor dip during the week, would be too. My nifty-50 stocks have risen from 13 on buys and 15 oversold six trading days ago to 41 on buys and 29 overbought as of the close Friday. Virtually every index and sector ETF is overbought.

Once again, the market internals, ruled by short-term and long-term breadth, called the swing low, the turn, and the rally (see the circles and lines on the chart below).

So why bring this up now?

Because there is more to come in this bull market, either right away or right after a shallow pullback. The short-term breadth indicator is just too strong to be turned on a dime, and with the long-term breadth having just come out of a divergence itself (see the circle in the middle of the chart), there is a good chance this rally has another three, four, or more weeks to run before any significant sell-off is possible. So every dip is to be bought, and every surge savored.

Could it be different this time? The market could do whatever it wants but history says not right now, and history, when it comes to the mass psychology and movements of the market, is the best indicator of all (no matter who says otherwise).

(click on the chart for larger view)

#MarketTiming – Time for a bounce…

Just spent a week in New Orleans watching Carnival parades, eating too much food and listening to lots of great music.

So what did I miss in the markets?

Just kidding. Saw all that too. Long time coming but again, just as everyone started to believe it was, it is NOT DIFFERENT THIS TIME.

The question to be answered is was that just a correction after a great bull run or is that the first plunge from a new bear born? Probably the bear is being born but we’ll have to see if it is so in the fullness of time.

For now, after Friday’s further plunged to another new low and reversal back into positive territory, it’s likely the market will bounce this week. How high and for how many days is anyone’s guess but a bounce is what to look for, and, as they say, if one sees what one is looking for, jump all over it.

An important note, the lows and tests of lows last week set up a divergence with short-breadth (see the green circle in the upper section of the chart below). That is an aggressive trader’s buy signal. Works like a charm in bull markets. Doesn’t work all the time in bears. What happens next on that indicator could tell a lot about what kind of market we’re going to have going forward.

All swing signals registered buys Friday but the long-term breadth remains negative indicating so far this bounce will only be a bounce.



PRICE: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).


SPY CLOSE – 261.50
QQQ CLOSE – 156.10
CNN MONEY’S FEAR AND GREED INDEX: 10, rising, extreme fear level).
NIFTY-50 STOCK LIST: 19 Buys; 2 Overbought, 29 Oversold, 9 new buys today, 6 new sells.

(click on the chart for a larger view)

$SPY #Options on a roller coaster for a losing day trade

Today’s price action in the SPY was truly a day on a roller coaster. Consequently it was the same for the weekly calls and puts.

First, a gap up, then a plunge on the ETF (see the chart on the left below), another bounce into mid-day, and another plunge before a final surge into the close.

The SPY triggered a day trading buy on the calls, which stopped out for a loss 27% loss, $2688 on 10K traded, before reversing to the puts which saw a loss of $602 at the close (see the white flags on the lower right of the charts below, in-the-money calls on the left, puts on the right). That made the total loss for the day almost 33% per 10K traded, a draw down of approximately $3290, the fourth losing day in the past 20 trading days.

However, there were plenty of times defense could have been played during the day. This is day trading after all.

When the call failed to hold its open at 1.79 it could have been stopped out for less of a loss than when the system signal finally sold (the chart below on the left). On the reversal the put trade made up all of the loss on the call and about 11% more at its high (the yellow-coded spike into the last hour on the chart on the right). Selling that gain would have been a gift for the day but even coming down from that high on the puts, there was a breakeven (the end of the first cyan-coded bar)

Defense. Always take the signals, then play defense…

(click on the charts for a larger view)

$SPY #Options – #DayTrading 10K in weekly puts…FINAL UP 55%

Trading weekly 286 puts – 64 contracts at $1.49 – to start the day trade.

Current return per $10K in the white flag on the lower right of the chart below.

Will update.

Update #1 – stop at breakeven.

Update #2 – the trade topped out at up 39% (the green vertical line on the updated chart below). Violated its rising moving average at up 15% (the first red vertical line), a point at which to take some or all off for the day.

Stopped out at break even (the second red vertical line).

Obviously a disappointing day-trade in the put. Just as obvious it is the trades that do not hit the stop loss that make the most money.

Update#3 – Reentry at $1.49 again, $10K, 64 contracts. Stop at breakeven. See updated chart below.

FINAL UPDATE: the last entry in the puts rode the sell off to the close, netting approximately 55%, $5,500 per $10K in the trade. So the disappointing, even with the first stop loss, day in puts turned out to be just fine. See final updated chart below.

TUESDAY UPDATE: Another day trade in puts, triggered off SPY’s gap at the open. A fairly frustrating sideways move after the open. Stopped out on the first entry for a 12.2% loss on $10K in the weekly in-the-money 284 strike, 36 contracts. Reentered the 284 strike, 41 contracts, for a 27% gain into the close, for a total net of 14.8% on the day, $1,480 per $10K in capital. I’ll skip the chart for today.

(click on chart for a larger view)

#MarketTiming – Bullish #SwingTrading continues…

The market had its one down day two trading days ago and has, as usual, vaulted higher off the opportunity of buying coming out of that one-day dip.

Quite frankly, except for the money to be made by either buying and holding or trading the long side, I’m getting pretty bored this bull market’s endless advance. I would like to see some pullback. Actually I’d like see a drop that scares the balls off the bragging bulls. That would be amusing.

Possibly we’ll get some pullback with both short term breadth and volatility, of my three swing signals, now on sells, but I’m not counting too much on it – sells are sells only, not shorts, as long as long-term breadth remains positive.

Overall the swing signals continue to be consistently profitable.

Volatility since the beginning of last year has been crushed with the VIX falling below 10 repeatedly. On the swing signals – based on Price, Breadth, and Volatility – the leveraged ETF, XIV, appropriately performed best on its own signal – up 105 percent for the year.

See the chart panel below for XIV on all three signals – the white flags are the returns per $100K place on each swing trade, which also corresponds to percentage gains.

A buy and hold on XIV wildly out performed all of these swing signals, up 159 percent since the beginning of last year (what a year!), but one would have had to have known that a buy-and-hold was going to do that from the beginning. On the other hand, swing trading controlled risk at every turn while also notching remarkably returns.



PRICE: Buy. (Day 2).
VOLATILITY: Sell, (Day 2).


SPY CLOSE – 277.92
QQQ CLOSE – 164.49
CNN MONEY’S FEAR AND GREED INDEX: 79, rising, extreme greed level).
NIFTY-50 STOCK LIST: 32 Buys; 25 Overbought, 4 Oversold, 10 new buys today, 4 new sells.

(click on the chart panel for a larger view)

A flat day in the $SPY options day trade


Had buys signals across the board from Friday so the entry in the SPY options was at the open on a gap that proved to be frustrating by the end of the day.

The weekly in-the-money SPY call (267 strike) on the opening buy instantly surged in the first ten minutes to up 40% (a fast market move), but then came off immediately and ground down steadily all day to the close (see chart below). It was up 6.6% on a $10K buy-in at the close. A profit is a profit, but that 40% back at the open gnaws on the mind all day as to what might have been. Needless to say, there were plenty of opportunities to take a higher profit on one of the intraday bounces but that too can lead to sloppy trading. Up to the individual trader how the day, during the day, is played.

Didn’t quite get with the weekly QQQ calls (157) which were a much better trade today, up 21% at the close on a $10K buy.

(click on the charts for a larger view)

$SPY $QQQ – a December rally worth hating…

Granted the general market has rallied this month fairly steadily. Great for buy-and-hold investors, who don’t plan to sell even if it doesn’t, but not so great for swing traders like me.

My swing signals, usually so reliable, have been all over the place. Last Monday buys across the board, market tanks. Tuesday sells, market rallies. Wednesday mixed. Thursday sells across the board, market rallies Friday. Friday buys across the board, Monday…uh, market follows through to the upside…

But follows through in the worst possible way. My signals are for the open the day following the day they trigger. So today’s open gapes up big…then backs off and goes sideways all day for little or no gain from the open. That’s pretty much the way it’s gone on all month.

I do recognize these are swing signals, meant to capture individual moves, and they by their nature can be problematic in a strongly trending market like this one.

The main ETFs I trade, TQQQ and XIV, are up roughly six to eight percent each on the several swing trades this month. Nothing to cry over but those guys are 3x-leveraged so those gain are not much to sneeze at either.

What now?

Everything is up at least for a second day and have entered the first stage of too much too soon. Thirty-nine of my nifty-50 stocks are on buys with 24 overbought (a lot), and CNN Money’s Fear and Greed Index is at a greed level but still a potential divergence if it turns now(see table below). The market can go higher of course, and probably will given the season and given it’s a bull market, but the imminent passage of the Republican tax bill may turn out to be a sell-the-news event so caution as always is warranted here.



PRICE: Buy. (Day 2).
VOLATILITY: Buy, (Day 2).


SPY CLOSE – 268.20
QQQ CLOSE – 158.64
CNN MONEY’S FEAR AND GREED INDEX: (74, rising, greed level).
NIFTY-50 STOCK LIST: 39 Buys; 24 Overbought, 3 Oversold, 10 new buys today, 1 new sells.

UPDATE (12/5): $QQQ and $SPY weekly options – a recurring plus 100% dream…

UPDATE (12/5): As suggested yesterday the day began with the Nasdaq (TQQQ) rallying, but unlike yesterday, which was perfect for a QQQ weekly option trade, today would have taken some nimble trading to secure any profits in the QQQ calls and the SPY calls. On a $5k buy close to the open, the QQQ in-the-money call for this week (152 strike) rallied up 56% at its peak, violated a trailing moving average at up 48% ($2400), before selling off all the way to breakeven. Two $5K buys on the SPY in the money calls first stopped out for a 1.2% loss, and on a reentry rallied up about 25% before collapsing again to breakeven.

However, the options day-trade play of the day came in the SPY in-the-money put (265 strike) which triggered later in the day and finished at the close up 66% ($3300 on $5K.

Not a terrible day, but a trading test at best.

Haven’t had a chance to update entries here since Wednesday (11/19). Given what happened in the market today, it is as if nothing has happened since. Today was almost an exact replay of last Wednesday with the Dow up, the SPX relatively firm and Nasdaq Composite slamming down 72points.

Take a look at the post below. My first sentence was:

The Nasdaq sold down hard right from the start today, and that is a day-traders dream in weekly options.

If there are recurring nightmares in life, can there be recurring dreams?

No doubt.

With the Nasdaq selling down hard right from the start today, the $5K day-trade in the weekly QQQ in-the-money put finished on its peak at the end of day up 120%, $6000 on a $5000 commitment to the trade. Even the SPY in-the-money weelky put cash in on the market’s the slide, netting 118%, $5900 on the $5000 play in the option. The key to this day-trading system for options (as I have written before) is having an entry a trader is comfortable with, likewise a comfortable protective stop, and on the days (like today) when the stop is not hit, the gain, obviously, can be substantial.

I’ll let the great trader and “market wizard” Linda Bradford Raschke sum it up: “Always take the trade,” she once said, “and sometimes you just get lucky.”

So what now? Once again TQQQ may have dropped too far too fast so I will not be surprise if that 3x-leveraged Nasdaq ETF bounces tomorrow like it did last Thursday and takes the rest of the market with it. Maybe for a couple of days…or more.


PRICE: Sell. (Day 2).
VOLATILITY: Sell, (Day 2).


SPY CLOSE – 264.14
QQQ CLOSE – 152.71
CNN MONEY’S FEAR AND GREED INDEX: (63, falling, greed level).
NIFTY-50 STOCK LIST: 20 Buys; 13 Overbought, 13 Oversold, 7 new buys today, 4 new sells.

Day trading SPY options for 72% so far…

Day Trading SPY options – is it a “fool’s game”?


Playing the fool’s game today.

Buying the weekly SPY 257 in-the-money call, expiring Friday, with a limit of $10K. At the moment up $7200 (72%) on two trades, $5K each (see the chart below).

Will update.

UPDATE END OF THE DAY: The trade mechanically closed the day up $4800 (48%). At its peak (see green vertical line on updated chart below) is was up 83%, and there was a possible exit after the peak at up 72% (the while line of the chart).

(click on the chart for a larger view)

Day trading SPY options for 72% so far…

Day Trading SPY options – is it a “fool’s game”?


Playing the fool’s game today.

Buying the weekly SPY 257 in-the-money call, expiring Friday, with a limit of $10K. At the moment up $7200 (72%) on two trades, $5K each (see the chart below).

Will update.

(click on the chart for a larger view)