$SPY – Can Orange Become The New Black Swan?

Four days up in a row for SPY and TNA while the Nasdaq, long the leader, now lags…

At the close of the day forty-one of the stocks on my nifty-50 stock list ended in the buy column with fourteen overbought.

Short-term breadth was up again but is now in overbought territory. Usually it takes time to unwind that even when it turns down.

Long-term breadth has been rising now for just three days, giving worthwhile advances in most everything — 40 out of the 50 stock on my list advanced today, and 41 or the 50 are positive on this three-day upswing. It should be noted if long-term breadth turns down now it will put in a fairly serious divergence with the SPY new high (see chart below).

Which bring us to the news?

I don’t ever trade the news but just taking in some market perspective one wonders if something is going to come along and blindside the complacency of this bull advance? Like the odd VIX spike today. Like AAPL gone crazy and possibly running out of buyers besides AAPL itself. Like some sector gone so frothy so fast it signals irrational exuberance has crossed over into insane exuberance (see the pot stocks in the post below).

Or like two of those closest to the jabbering President of the United States suddenly going down coincidentally on the same day, one with a guilty plea and flip, and the other found guilty on 80 criminal counts that could get him 80 years in prison. Trump claims always to be the best, be the greatest, know more than anyone else, likes setting records…how boastful can he be when his administration racks up more convictions than any other, including the Nixon administration?

What’s it mean to the market? As I write this, I see futures are down, with the Dow futures reversing the day. This bull market has been able over and over again to erase the overnight falls in futures. What if this time it doesn’t?

I guess then we might be able one day to look back and say: “Whattaya know…Orange
was the new black…SWAN!”

(click on the chart for a larger view)

$AAPL – still rising in an ever thinning market

AAPL continues to rise among my bellwether stocks.

The others to some degree or another have sold off in recent weeks (see chart panel below). That would indicate the market is being led higher by fewer and fewer leading stocks. Maybe just one since AAPL is in all three major indexes except the Russell.

However, the general market managed to follow through Friday on the short-term breadth signal and turned long-term breadth up. If all goes well for the bulls we should have a rally for a couple of weeks at least that moves more of the bellwether stocks to the upside.

(click on the charts for a larger view)

Tuesday in the $10K day Trade…Final 10% gain

Tweeted this trade near the highs of the day. SPY 280 Call, Wednesday expiration, up 38%. TQQQ at the time was up 1.5% ($1500 per $100K).

This was a display of a day trade based on the suggestion (see post below) that Tuesday after three days down in the Nasdaq (two of them hard down) would bounce today with an entry into the trade near the open.

Some defense (like a trailing stop) had to be played to lock in gains intraday since once again with long-term breadth still negative there was the possibility of another fade into the close, which happened. Still (see chart below), the SPY trade netted 10% for the day, and TQQQ added another $450 on its $100K buy.

Not a bad return for the day even if the defense stayed on the bench.

Tomorrow, AAPL will be the focus of the day for the general market. The company reported earnings after the close today and rose eight points in the after-market to an new all time high. The question will be can it vault the market higher for the day or will this be a “sell the news” time?

(click on the chart for a larger view)

#MarketTiming $QQQ – tomorrow the bounce…

After three days down in the Nasdaq, two of them hard downs, it is very likely time for a bounce tomorrow.

All of my bellwether stocks, as suggested yesterday (see posts below), followed through with losses today, led by NFLX down 5.5%. With the exception of AAPL and GOOGL they are all oversold. In addition forty of my nifty-fifty stocks are on sells with 34 of those oversold. Forty or more sells usually means we are at the bottom or the beginning of a swing bottom before a bounce.

Most likely he Nasdaq Composite Index has gone down too far too fast (see chart below). Focus on the chart and note that each time the blue histogram pierces the green lines, what happens next is a bounce, sometimes a substantial bounce. That is the most compelling technical case for timing a bounce for tomorrow. Also note if there is a bounce, it will likely not be a bottom. Bottoms and subsequent rallies come after retests.

This time could be an exception of course since the market can do anything it wants any time it wants but for now, I’m watching tomorrow open primarily for some play on the long side.

(click on the chart for a larger view)

Declining Margin Debt – the bullish scenario

Margin debt, money borrowed to leverage the market, has for now topped and is in decline. Before the top in February it had reached levels far beyond the surges in 2000 and 2007, which could be an ominous indication of what is to come when and if margin debt continues to unravel.

See the chart below and the charts in the link.

Does the fact that it is coming down as major players try to ease out of their leveraged positions mean the market, measured by the S&P 500 stock index (SPX), has also topped? For the time being it would appear it has but history would say that’s not necessarily so.

MARGIN DEBT AND THE MARKET

From the link:

“The first chart shows the two series in real terms — adjusted for inflation to today’s dollar using the Consumer Price Index as the deflator. At the 1997 start date, we were well into the Boomer Bull Market that began in 1982 and approaching the start of the Tech Bubble that shaped investor sentiment during the second half of the decade. The astonishing surge in leverage in late 1999 peaked in March 2000, the same month that the S&P 500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge began in 2006, peaking in July 2007, three months before the market peak.”

Simply put, that would mean there is at least another new high coming in the new few months (the summer rally?) before any significant bearish behavior in the stocks.

The heads up is to say those highs, if they come, will be opportunities to sell, or at least tighten stops on long-term investments. A second look at the chart shows that the SPX, coming off highs in margin debt, declines close to 50%. Those were real bear markets. The next one could be worse. Regardless, no matter how low it goes, it is best to be avoided.

There are two possibilities it could be somewhat different this time. One, margin debt itself could surge to another new high along with a strong months-long market rally (see the jingle-jangle in 2015 on the chart); or two, the top is already in and the next leg down (given how astronomically high the margin debt is beyond 2000 and 2007) could be a dead bull dropping right out of the sky (they can not fly forever).

(click on the chart for larger view)

#BellwetherStocks – End Of A Swing Trade

The swing trade for buying stocks signaled by the market’s breadth indicators on the open of April 4th, thirteen trading days ago, ended on the open of trading today.

START OF THE TRADE

Despite a choppy market in which neither SPY nor QQQ rose as much as one percent, all twelve of the bellwethers were in the black for the trade and several on the list had rather stellar gains for 13 trading days — TWTR up 20.5%, NFLX up 19.3%, TSLA up 14.2%, AMZN up 13.1% and FSLR up 11.4%.

The Bellwether stocks with single-digit gains were FB, 9.7%; BIDU, 8.4%; BID 7.5%; NVDA 6.3%; BABA 6.6%; GS 2.3%; and last and least (remarkably) AAPL 1.4%.

Once again, market timing has been validated by the stocks even when the market is going no where.

On the charts below, the white flags on the lower left quadrant of each chart is the dollar gains for $100k invested in each particular stock.

Thirteen days…

(click on the chart panel for a larger view)

#MarketTiming – From follow through to follow through

The general market, after Tuesday’s bounce, followed through today for big gains across the board, made all the more bullish by coming back from a deep gap down.

The Dow, or instance, was down 500 points at the open and finished up 230.

The question now, of course, can there be more tomorrow.

All indications are this correction is over with many of the indexes touching their 200 daily moving averages, with my nifty-50 list of momentum stocks triggering 30 buy signals in the past two days (Monday all but two of those stocks were down, today all but six were up), with CNN Money’s Fear and Greed Index finally lumbering up off a very low readings at 12 today (it got as low as six and can’t go below zero). That later index is still registering “extreme fear” which is the time a time for investors to be looking to buy stocks.

But most importantly (see the chart below), short-term breath put in a low above a low in negative territory, a divergence with the SPY Tuesday which needed a follow through into positive territory to turn the all-important long-term breadth up. The follow through came today.

All three of my swing-trading signals, based on price, breadth and volatility, are on buys now.

So this market bounce has more to come and could morph into a full-fledged multi-week rally.

Some notes. AAPL is probably the safest bet during a market bounce (emphasis on “safest”) but NFLX, NVDA and TSLA will probably out-perform among the big boys. Look at TSLA today, up 7.5% on the day and 13.7% from the open — there was some dope just last week predicting Elon Musk’s baby would go bankrupt.

(click on chart for a larger view)

$SPY options – another freaky Friday?

Last Friday, the calls in what I’ve ironically labeled for myself the “Fool’s Game” exploded 250%.

In my post in this link below I noted that going into that Friday, my game was looking at its first losing week this year and there had been no trending day during the week also for the first time this year. I define a trending day as any day either the weekly SPY calls or the puts close with a 100% or more gain.

TRENDING DAYS IN THE FOOL’S GAME

So what’s this week look like? Pretty much the same as last week.

As of today’s close, this day-trading system, buying SPY calls and/or puts, expiring either Wednesday or Friday, is losing money, a jarring 81% for each $10K traded (it was losing 152% at last Thursday’s close). Obviously, one does not trade this with any more than a small portion of any account. In addition, this week again there has been no trending day.

Can last Friday be happening again this week? I’m going to suggest — yes!

SPY is down this week four days in a row (not much) which tends to be a magical number for a turn-around in my experience with swing trading, especially in this bull market. The Nasdaq Comp is down three consecutive days. CNN Finance’s “Fear and Greed” Index is down four days to 21, an “extreme fear” level, a neighborhood in which one should consider going long. Yesterday, 40 of the stocks in my nifty-50 stock list were on sells (that is usually the bottom or the beginning of the bottom in any downswing, however small). Today those stocks clicked up to just 38 on sells. The VIX gave a swing buy signal to go long on tomorrow’s open.

And tomorrow is Friday. There have been twelve trending days by my definition so far this year and seven of them have come on Friday. Freaky.

Added all up, tomorrow looks like a run to the upside again and the calls could go crazy, again, if its another trending day.

Or the market could have a monster fifth-day-down crash…but then that would also be a trending day, only in the puts instead.

#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 weekly $SPY options in the “fool’s game”

If anyone wants to take a peek (or another peek) into the link below from Thursday, or look down at the entry immediately below this one, they’ll see it was said: “In other words, I expect the market to shoot up on Friday”.

SPY – CAN THE BOUNCE BECOME A RALLY?

The great trader and “Market Wizard” Linda Raschke once put it very simply: “When you see what you are looking for, jump all over it.”

Well, Friday was a day to look for a rally after the market slid sideways to down all week, and rally it did with the Dow up 343 points, the SPX up 43, and the Nasdaq Composite up 127. TQQQ jumped 4% from its Friday open, UPRO did 3.2% from its open.

Needless to say that is better than money in a bank.

But what about THE FOOL’S GAME I’ve been writing about recently, buying weekly SPY calls and puts as day trades?

Friday that system was up 141% with a combination of trades in the weekly 273 put and the 271 call, both expiring that day. The 273 puts lost $1254 per $10K in the trade while the 271 in-the-money calls gained $14,482 per each $10K trade (there were two) for a total gain for the day of 131%.

The Friday expiration makes for the best day trades in the weeklies. Has been that way all year with this Friday as, obviously, no exception. Its 131% net brought the total gain for the week to 226% — $22,600 for no more than $10,000 in any day trade during the week.

I have not much more to say except to remind that everything said here is for entertainment and educational purposes only, and for my own personal trading journal, and should not in any way be construed as investment or trading advice.