$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 – Stall or drop?

Been on vacation so haven’t been able to keep this blog as timely as I would like.

And besides, being in places where there was not even cell-phone coverage, I see I’ve missed a pretty sprightly rally. That’s the way it goes sometimes.

Anyway, TQQQ, my favorite leveraged ETF, is up 21% on the short-term breadth signal (the NYMO), six trading days ago. That signal triggering from double-bottom territory on the NYMO set the stage for the rest of the signals. Consequently, TQQQ is up 12% on its price signal and 8.3% on the long-term breath signal (the NYSI).

See the charts below — from left to right, short-term breadth, price, long-term breadth.

Since the rally’s start on the open of 6/4, other leveraged ETFs of note were SOXL (semiconductors) up 23.7%, FAS (financials) up 11.6% and FNGU (fang stocks) up 25.8%.

Gains among my be “bellwether stocks” were led by TSLA up 20%, coming from deeply oversold, AAPL up 11%, WYNN up 12.4%, SHOP (newly added to my list) up 14.4%, AMD up 14.5% and even a biggie like MSFT was up 9%.

Did I mention that we’re talking just six trading days, from Tuesday last week to Tuesday today? I guess I did. Six days, needless to say, that is what swing trading is all about.

So what now?

Both short-term breadth and price gave sell signals today with much of the market still wildly overbought. Likely we get a pullback starting tomorrow. Or at least a sideways stall to work off the overbought conditions. Note the big black candle of indecision today on the chart to the right. Below the low of that candle it’s a drop, above the high a resumption of the bounce.

If, by chance, this upswing was just more of the thrust from December to make everyone believe the bearish growl last fall was nothing to listen too, I suppose this rally could drop right out of the sky.

Either way, as long as the long-term breadth (the NYSI) is rising, the path of least resistance is up.

(click on the charts for a larger view)

$SPY – Friday’s calls at the end of the bounce…

Friday’s 285 calls immediately vaulted as high as a 42% gain but wound down for the rest of day, hitting a breakeven stop along the way, and finishing down 52%.

If one studies the day’s bounce from the opening gap down and final reversal at the close (see final chart below), it’s apparent there was not much to do to capture some of the profit on the day before it was all gone on the stop loss. The bearish gap at the open might have given a hint to fast and nimble traders three days was all this bounce would have. Of note, it’s evident how important a stop is to avoid letting a profit turn into an outright loss.

Suspect Friday’s price action is a sign this little three day bounce has reversed and there will be downside next week, but we’ll have to see Monday.

There were no puts to buy on the reversal day since after the early run up SPY never quite fell back through its open.

(click on the chart for the full twitter thread)

(Click on the chart for a larger view)

$SPY – Long Friday calls on bounce day three…

The bounce continued Thursday…

(Click on the chart for a view of the final tweet)

(Click on the chart for a view of the initial tweet)

$SPY – Calls on bounce day two

The market followed through strongly Wednesday after a “turnaround Tuesday” on the current bounce signal.

(Click on the chart for the full Twitter thread)

$SPY #Options – Calls on the bounce day…

The great trader and “market wizard” Linda Raschke, talking about trading setups, once said “when you see what you’re looking for, jump all over it.”

As outlined in the post yesterday, I was looking for a market bounce, possibly as early as a “turnaround Tuesday,” and voila! The bounce began in the futures overnight and followed through on the open into an upswing for most of the day before selling off into the close (see the tweet and charts below).

The SPY in-the-money 281 call (SPY opened at 281.99), Wednesday’s expiration, netted a final 52% for the day trade, $5200 for each $10K traded.

(click on the chart to see the complete Twitter thread)

The Final chart:

(click on the chart for a larger view)

#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)

#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)

$SPY $QQQ – Defense, defense, defense…

With $SPY up 5 days in a row and 8 of the last 11, and with the Nasdaq up 5 days in a row and 10 or the last 11, short-term breadth turned down today…

How many times have we seen that before?

In addition, my nifty-50 list of stocks started to turn on Tuesday from 48 buys (and 40 overbought) on Monday to 22 on buys (and none as yet oversold) today. CNN Money’s Fear and Greed Index has finally, begrudgingly it seems, managed to crawl out of its ‘extreme fear” reading to a mere “fear” reading today.

This was been a spectacular bounce from extreme fear but at this point maybe too spectacular. Almost every index is up five days in a row. The Nasdaq Comp is well beyond two standard deviations of an average advance when one is usually enough to throw the advance into a pullback or a sideways slide (see the upper red line on the chart below). And that’s despite the AAPL news blip in the middle of the rally.

SPY has also moved that much but that ETF, mirroring the S&P, has reached strong resistance at its 260 level.

Usually, this would be called “too far, too fast.” This time it looks like “too much, to soon.”

A lot of shorts have been scorched. A lot of traders are sitting on big gains in no time at all. TQQQ for example is now up 35% in the past 11 days, NFLX 38% and looking to gap up more tomorrow. There’s momentum in those numbers so I suspect there will be more upside to work it off but at the moment with a hint from a slight falter at an astronomical level from short-breadth it could be time for a dip.

One suspects those left behind on this bounce are beginning to believe it’s more than a bounce, and one suspects long-term holders are holding their breadth in the hope it is (sorry, boys, just look at how far anything is from its high and it’s overbought already?).

The market can go up as high it wants and for as long as it wants, of course, but this really looks like as good as time as any for a dip, probably tomorrow.

And since this appears to be a typically fierce bear-market rally, any dip can get carried way with itself and become a dose of despair…the play is defense, defense, defense…

(click on the chart for a larger view)

$AAPL – a Santa rally revisit

On the way to writing what was intended to be a cheery progress report on the buy signal posted here Christmas Day the bear took a bite out of the after-market and had an AAPL for dessert.

AAPL has plunged after-hours as CEO Tim Cook lowered earning guidance in a surprise announcement after the close.

This was forewarned here last November in this post:

AAPL Giveth, AAPL Taketh Away

I’ve been an AAPL bear for quite a while because when a stock is priced to perfection one must remember perfection usually lasts less than the blink of an eye.

Before the news, the general market from the open of the day after Christmas on the buy signal in the immediate post below was is in a very sharp upswing, a true Santa Claus rally.

TQQQ on today’s close is up 20.6%, UPRO up 18.4%, TNA up 20%; among the sector ETFs, LABU is up 31.2%, ERX up 21.3% and FAS up 18.2%.

We’re talking five trading days here.

The bellwether stocks moved too – NFLX up 14.4%, FSLR up 8.1%, GS up 9.6%, and AAPL itself was up 6.5%.

And not a sell signal anywhere to be seen at the close, except maybe the fact after five-day up pattern in the index ETFs one had to be alert to a sell down and maybe the fact my Nifty-50 stocks list, which went from 48 stocks on sells to all 50 on buys in those five days, clicked down to 47 on buys today (a crack in the advance, but a very small crack indeed).

All that is likely to change tomorrow thanks to the AAPL news. In the link on AAPL above it was noted it would take the market with it when it fell given that it was dominant in not only the Nasdaq but also in the S&P and Dow, and it has been the most over-owned stock in the market.

Since August it has and appears it will again.

And it was noted in the Christmas Day post that in the general market this was going to be little more than a market bounce to give some relief to the bulls in a bear market, not a beacon of hope for a resumption of the bull.

Funny how news comes along to agree with market history, with market internals, with the relentless swings from fear to greed and back again, all in the fullness of time.

See the charts below for a look at the AAPL and TQQQ plunges after the close.

(click on the charts for a larger view)