$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)

$SPY $QQQ – finally a gap and fall that’s worth some money

The general market gaped up today, ran higher, quietly rolled over, then roared down into the close.

It was the quiet at the highs of the day that was a bit eerie. VIX was up (as it has been for the two previous days) and that’s not supposed to happen as the indexes advance. The NYSE advance/decline line was almost immediately below its open. The SPX tagged 2800, the Dow ran through 26,000, and then everything just stopped and reversed. At first, it was almost as if Coyote from the Roadrunner cartoons had again run off his cliff and had yet to plummet to the valley floor below and then like a car that runs out of fuel going up a steep hill.

In the end the day felt like SPX 2800 and DOW 26,000 could be nice round numbers to leave behind.

If one looks at the close in comparison to yesterday’s close it appears as if nothing much happened today. But the close today is deceptive. The close does not quite register the initial leap and the final fall.

And it was a fall worth something. On my $10K weekly options model, the intraday sell signal on the in-the-money QQQ 166 put raced up to a peak gain of 167% and finished the day up 127%; the SPY in-the-money 280 put peaked at 94% and finished the day up 51% (see the white flags on the lower right of the charts below).

If there more downside to come?

Over and over again, this bull market has said no and charged ahead after every little downside glitch. It will continue to do so until it doesn’t. After today’s reversal from higher highs, long-term breadth turned negative making all of the sells on my swing signals shorts (see table below). If today turns out to be the time the bull does not charge higher, well then…it will be a bull that dies with a sigh instead of a snort.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Sell (Day 1).

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

CONTEXT:

SPY CLOSE – 276.97
QQQ CLOSE – 164.02
CNN MONEY’S FEAR AND GREED INDEX: 75, falling, extreme greed level).
NIFTY-50 STOCK LIST: 23 Buys; 18 Overbought, 7 Oversold, 0 new buys today, 9 new sells.

(click on the charts for a larger view)

$SPY – Sideways to down?

After four days up in a row most of the major indexes are due for a pause.

The market is overbought almost across the board. In my nifty-50 stock list, 29 of the stocks are overbought (that is a lot), of the nine 3x-leveraged ETFs I follow eight are overbought.

Given how much bullish momentum is in the market it is most likely it will be a sideways move, and if down, not down much (see chart of SPY below).

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Buy (Day 14).

PRICE: Buy. (Day 4).
SHORT-TERM BREADTH: Buy. (Day 4).
VOLATILITY: Sell, (Day 2).

CONTEXT:

SPY CLOSE – 273.42
QQQ CLOSE – 160.92
CNN MONEY’S FEAR AND GREED INDEX: 75, rising, greed level).
NIFTY-50 STOCK LIST: 34 Buys; 29 Overbought, 4 Oversold, 6 new buys today, 3 new sells.

(click on this SPY chart for a larger view)

$SPY $QQQ – long calls for a 100% day trade

THE FOOL’S GAME – BUYING CALLS AND PUTS

The play in the Fool’s Game today was obviously calls just after and above the open (see charts below) for QQQ first, then SPY.

The SPY calls have stalled so far at up 12% but the QQQ calls (with the Nasdaq Composite at plus 90 points) have hit 100% for the day, $10,000 profit on a $10K commitment to the in-the-money 156 call, making this a day option day traders live for.

(click on the chart for a larger view)

$SPY $QQQ – A December Rally to hate Part Two

A DECEMBER RALLY WORTH HATING PART ONE

The market was up to its current tricks again Tuesday. Came into the day with a signals blaring buys and the market sold off.

As noted in the link above this has been going on pretty much all month. One day a buy, the next day a sell…hasn’t mattered much except as a fade. But one can’t fade signals developed over years of experience in the market or the signals won’t matter anymore, nor will the years of experience. Finally, when a11 is in doubt, there is a moment of obvious follow through that may indicate all is back on track.

That may be today.

Yesterday, all my swing signals turned again to sells (see table below). Long-term breadth was still moving up for the third day in a row, but limping. Still, if all was right in stock-market world, today should go down on the short-term signals, even gap down. Instead, tricky as its been, it gaped up…

Then sold down fast. …Hmm, that may be the indication all is back on track. If so, it could be the passage of the Republican tax plan, as many have suspected, might be the hammer that breaks the bulls back – a classic sell-the-news event.

Hard to know that for sure, but the market has been too tricky lately — too tricky — and that too may mean something. Trader Vic Sperandeo once said if the market doesn’t do what it’s expected to do, it will do the opposite twice as much. Of late, there has been an awful lot of bullish belief out there. Sentiment turns slowly and often too late, often not until it’s obvious the market is not doing what it is supposed to do.

Is this the day? As with everything in the market, we will, as the great Ed Hart of the old Financial News Network used say, “know in the fullness of time.”

P.S. Didn’t get a chance to post this Tuesday because of other pressing matters, and wouldn’t you know it on a day like today I overslept (I live on the West Coast).

SWING TRADING SIGNALS:

LONG-TERM BREADTH: Buy (Day 3).

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

CONTEXT:

SPY CLOSE – 267.17
QQQ CLOSE – 157.7
CNN MONEY’S FEAR AND GREED INDEX: (73, falling, greed level).
NIFTY-50 STOCK LIST: 35 Buys; 22 Overbought, 3 Oversold, 1 new buys today, 6 new sells.

$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.

$SPY options – an 11% gain for a day

DAY-TRADING THE FOOL’S GAME:

At the time of the Tweet below, the weekly SPY ITM 265 call was up about 31%, basically the peak of the day. It sold off somewhat into the close, finishing a mechanical day trade for 11.3% profit.

The charts below reflect a $10K buy-in on the call (54 contracts at $1.82 per contract)

THE FOOL’S GAME

END OF THE DAY UPDATE:

I say ” mechanical” above for the finish of the trade because there was no real sell signal during the day.

However, when day-trading weekly options (expiring this Friday), it often helps to also be flexible and take discretionary profits from time to time. In this case (see the chart below) there were ample opportunities to close this trade out on the jags and zig-zags on SPY while the call was at the $2300 to $2500 levels (23% to 25% levels).

There are more exciting days in the Fool’s game but today may be more indicative. A 11% gain for a day is still a 11% gain for a day.

(click on the chart for a larger view)

#MarketTiming $QQQ – a bounce nearly guaranteed…

Thirty-nine of the stocks on my nifty-50 stock list are on sells. Nineteen of those are oversold. If that number was 40 sells or more, I’d take out the “nearly” in the title above. Forty is the magic number that brings a bounce in the market within a day or two.

But only 39…so only nearly guaranteed…

See the chart below to view the stretch of sells (the red boxes) on the stock list and what happens next in the Nasdaq.

In addition two of my three swing signals – Price and Volatility – switched to buys while short-term breadth remained on a sell for the fourth day in a row. Four days down on breadth tends to also lead to an upward pop.

With long-term breadth on a sell, the bounce, if it come today, might be a one-day event but we’ll see.

SWING TRADING SIGNALS:

LONG-TERM BREADTH: SEll (Day 2).

PRICE: Buy. (Day 1).
SHORT-TERM BREADTH: Sell. (Day 4).
VOLATILITY: Buy, (Day 1).

CONTEXT:

SPY CLOSE – 263.24
QQQ CLOSE – 153.50
CNN MONEY’S FEAR AND GREED INDEX: (61, falling, greed level).
NIFTY-50 STOCK LIST: 11 Buys; 3 Overbought, 19 Oversold, 3 new buys today, 8 new sells.

(click on the chart for a larger view)

$SPY Options – day trading weekly 258 calls

THE FOOL’S GAME

CONTEXT FOR THE DAY TRADE

Long $10K (in two $5k stages) in the weekly 258 calls, expiring Friday from 1.48. Currently at 2.11 up 40% for the day. Stop now at 1.90.

Will update later:

END OF THE DAY UPDATE – up 34%