$LVS $WYNN – “No one knows how to bankrupt casinos like I do.”

I made up the quote in the headline on this post but I’d bet the first thought of everyone — EVERYONE — who read it was Donald Trump said that?!

He might as well have (maybe he has sometime in his daily incoherence). Before he got into the money laundering business with the Russian Oligarchs, he owned casinos in Atlantic City. They all went broke.

He doesn’t own any gambling palaces anymore but it appears as President he’d like to help bankrupt those of his friends as well, like a hobby on the side. Both Sheldon Adelson and Steve Wynn are big Trump supports. Or at least they have been. Looking at what’s happening to the shares of their companies, one wonders if they still are. If they are, what’s the matter with them?

This probably has to do with the way Trump has managed to get the Chinese to quit playing games of chance but who knows? Maybe it’s just his “golden touch” in casinos is contagious? Or maybe, a more obviously, it might be, as much as fools wants to tout the supposed merits of a businessman in the White House, every fool needs to remember the last one was Herbert Hoover.

The worst is likely not over for LVS and WYNN, and the down staircases like these here (see the charts below) are likely going to get built soon in a lot of other stocks, and a lot of market sectors (even now take a glance at housing stocks and bank stocks and place bets).

(click on the charts for a larger view)

$SPY – Is the bouncing cat dead?

The general market has bounced from its low last Thursday.

The actual buy signal was issued on the market’s short-term breadth indicator for Monday’s open three trading days ago. In that time the 3x-leveraged ETF, TQQQ (the Nasdaq) is up 5.8% (the Nasdaq), UPRO (the S&P) is up 5.1% and TNA (the Russell small caps) is up 8.8%.

All this is fine and dandy in reaction to last week’s fast, severe sell-off.

Now the question rises: Is this a classic “dead-cat bounce”?

In stock market terms, as defined by Investopedia, “a dead cat bounce is a temporary recovery from a prolonged decline or a bear market that is followed by the continuation of the downtrend.”

Despite these last three days, the overall market hasn’t been able as yet to turn the all-important long-term measure breadth (the NYSI, the McClellan Summation Index) up, and today its short-term component (the NYMO) clicked down.

How many times have we see that before — the market pops out of a deep drop and the NYMO turns down in negative territory.

Dead cat? In addition the SPY ends today in a dreaded doji (see the chart below). Dead cat? Sure looks like it. If so, the market’s current recovery will roll over in short order…probably tomorrow. Maybe Friday (or maybe Friday too).

However, this is all could be (and probably is) a positive sign for swing-trading bulls. Since last week’s lows my nifty-50 stock list has moved from 40 stocks on sell signals (usually the bottom or the beginning of the bottom of a swing) to all 50 on buys yesterday. They clicked down slightly today (another sign of the cat) but the last time all this happened was March 5th at the end of the three-day bounce out of the March low. The cat that died that day gave rise in the end to the spring rally. If this bounce dies now, it very well could result in a bottom for a trading rally.

Such a rally may be, in the fullness of time, the last of this bull market and an opportunity for buy-and-holders to lighten up or to raise protective stops before the real bear growls, but it could also be a stock rally that rises all the way to the end of the year.

(click on the chart for a larger view)

$SPY – Market breadth takes a toll on a “Big Wednesday”

In surfing lore, there is the myth of “Big Wednesday.”

The myth was immortalized in the 1978 cult film “Big Wednesday,” written and directed by John Milius, who also wrote such movies as “Jeremiah Johnson”, “The Wind and the Lion” and “Apocalypse Now.” It was Milius’ contention elite surfers cannot acquire true greatness, legendary greatness, until they face and overcome the great waves, the legendary waves that rise and surge and rage along the California coast from out of almost nowhere. No one know why they come or when they come but as the movie puts it: “They always come on Wednesdays.” Maybe what Milius had to say about surfers should also be applied to market traders and investors.

Today was a big Wednesday in the stock market.

The Dow was down more than 800 points, the Nasdaq more than 300, the SPY nearly 100 points. Big moves out of, I guess one could say, flat surf on Tuesday.

Actually this was no real surprise.

There have been signs everywhere. The general market indexes have been rising in price to all time new highs for the past month in defiance of long-term breadth as measured by the McClellan Summation Index, the $NYSI (see the declining red dots on chart below). That was rather amazing to watch, particularly the way the NYSI kept falling day after day despite the lingering bullishness on the indexes, and in the end, as always, the NYSI took its toll.

In a head-to-head battle between price and market breadth (the sum of all stocks rising and falling) it may be hard to tell when the battle will end but it will end with breadth winning every time.

Long-term breadth is the most effective indicator of mass market psychology there is.

Even as market appeared to be rising on a few tech stocks alone — AMZN, FB, NFLX, NVDA, GOOGL and most notably AAPL — breadth was saying the bottom was falling out. When those stocks began to crumble (look up charts of FB, NFLX…), this day became all but inevitable.

Signs everywhere. Besides the obvious relentlessness of the NYSI, the economy-sensitive housing stock have been falling for months with the banks beginning to tumble with them (many of the banks broke major price supports today just like in 2007-2008); news low began to outpace new highs in late September and accelerated on October 4th (which also happened in 2007-2008); there were also rare whispers under the surface like the day the Dow made a new high while more than 50% of the SPX stocks were below their 50-day moving averages (last seen at the exact market top in 2007).

So is this the beginning finally of the bear market to come that is just as inevitable? Don’t know yet. The market can plunge farther now (as I write this it is in overnight futures trading); it could even crash. But it won’t be a bear market for sure until it rallies and that rally fails below the previous highs in the price of the major indexes.

I seldom have anything to say about fundamentals, since the technical trumps the fundamental every time, but probably I should mention when one considers what comes next, the here-and-now is a bull market that is ten years old, interest rates are rising, unemployment is at its lowest level in forever, margin debt in stocks is near its high and at an astronomical level; there has been a tulip craze in crypto-currencies, a mania in block-chains, and the strongest sector in the market right now is the weed patch, marijuana stocks.

If this is the death of the bull and the birth of a bear, everything I’ve just mentioned will not be with us much longer.

(click on the chart for a larger view)

$LVS and $WYNN – winning on the losing gambling stocks

The big tumble in the gambling stocks is probably another fall out (fall down?) from the Trump trade war with China.

Who woulda thunk the Chinese would quit the gaming tables in Macao, where both LVS and WYNN have major casinos, over a little tariff tiff?

Then again, this might be Steve Wynn, at WYNN, shuffling off the world stage in a Me-Too shadow, or maybe Sheldon Adelson, at LVS and one of Trump’s biggest campaign contributors, getting a mega-dose of whatever…

As they say, you never know how the chips are going to fall.

Actually, you can know.

Take those rectangles on the LVS and WYNN at the top of the charts below…Those are Darvas Boxes, pioneered by Nicolas Darvas years ago. Play with those enough by drawing boxes around price consolidations and taking the trade as it either comes out of the top or in the cast of these two out of the bottom of the box, and then add in a moving average to mark the path of least resistance and one can be up 23% since summer in LVS and 35% in WYNN by being short the downs in those stocks.

There is also a lot of simplicity in the gamble that is the stock-market game.

Also, take note these leaders in the gaming sector also show even in a raging bull market, there’s always a bear market somewhere.

So what now? More to come. There are no signs these two stocks are finished with their fall, and they will have to base, going sideways, for a long time across some bottom before they can recovers and have any chance of racking up winnings on the long side again.

(click on the chart for a larger view)

#MarginDebt – a sign of quiet desperation?

I gotta say, as a day trader, I’m beginning to wonder if this is the most bearish bull market ever – gap it up overnight with futures, sell it down all day.

I suspect this could be a sign some big boys are desperately trying to slip out of the market without anyone noticing, but what do I know about such machinations?

Needless to say, margin debt is at astronomical levels in comparison to 2000 and 2007. Since the chart below was published for August, the SPX has gone to a new high in September. We will not be able to see what margin debt has done at the same time since the data going into the chart calculation is assembled monthly (why is that?). But even if it goes to a new high also (a sure sign of continuing greed), it will only mean the bull market has more time to rise but also at an ever more risky height from which to fall.

(click on the chart for a larger view)

#MarketTiming – Time for a “Turnaround Tuesday”?

There’s an old cliche in the stock market that says after a down Monday, the market turns back up Tuesday.

Everything was up a bit today except the Dow but…

David Bergstrom writing at the excellent “See It Market” website back in June, 2017, (see this link: TUESDAYS MARKET CLICHE OR TRADING EDGE?) added a wriggle to the criteria for a Tuesday Turnaround.

The idea is that the market tends to reverse a Monday selloff or down day with a strong rally on Tuesday hence the name “Turnaround Tuesday”. If this is the case then we can test this idea and add a simple edge to our arsenal.

First, let’s define our “Turnaround”. If Monday’s Close is below Monday’s open then Tuesday should – based on our theory – show positive performance across the stock indexes. On the other hand, Tuesdays following a neutral or positive Monday (close > open) should fare only about randomly or without a strong trading edge.

In the charts below, you can see equity curves for Tuesday trading across the major stock indexes. The first chart follows an up Monday, while the second chart follows a down Monday – or our “Turnaround Tuesday” performance. The blue line represents the S&P 500 futures since 2002.


The charts he presented are these:

Quite impressive Tuesday performance as per his setup.

So what about now?

If one hasn’t guessed, Bergstrom’s set-up for tomorrow is in play. Today’s major indexes, represented by SPY, QQQ, and IWM all closed below their respective opening prices. So if he is right, tomorrow should be up, and possibly it could be the beginning the next market upswing to new highs.

In that latter regard, I will add my own indicators. While the all-important long-term breadth is down, short-term breadth (measured by the McClellan Oscillator), after a series of highs below highs, plunged into oversold Friday (see chart below) and turned up today.

In addition, my nifty-50 stock list saw 40 or more stocks on sell signals two and three days ago, which is usually the bottom of a swing or in this case the beginning of the bottom. There are now 28 on buy signals with 15 triggering buys signals today — the stocks are turning, which often happens before the indexes.

Also, the Nasdaq composite declined coming into today’s little bounce four days in a row. In bull markets that’s about all the steady decline one can expect. This is only the third time it has happened in this very bullish year in the Nasdaq and each time has marked the bottom of the downswing.

Reiterating: tomorrow, Turnaround Tuesday, the market will likely bounce and it could be the beginning of a rally back to new highs.

(Click on the chart for a larger view)

An $AMZN trade that was a coulda, shoulda, but not a woulda…

Shared the chart below of AMZN around the internet after the close last night with the suggestion that this was an obvious setup to buy puts or sell calls.

It was prompted by this post here yesterday:

$AMZN – a leader stumbles?

The idea was that the stock would continue its stumble today (and maybe for a week or so). See the blue boxes marking the spots on the chart when that has happened before as it comes off overbought (the yellow color coding on the chart).

Since long-term breadth had just turned down after a long run up and everything in the market was pretty much overbought, it was likely there would also be market pressure on the stock besides it being overextended on its own. Then there was that history thing in play again – the best indicator of all since it repeats or rhymes or whatever but it mostly whispers what’s going to happen next again and again.

It was a trade for today’s open. The most aggressive and least expensive entry would be an in-or-at-or-just-out-of-the-money put expiring Friday.

I coulda and probably shouda but I did not trade this. In general I don’t like stock options, don’t like the spreads, don’t like the lack of liquidity when it’s time to close it out, don’t like the complications (all those Greeks and spread strategies). I like my options trading plain and simple – it either goes up or it goes down, it is either a call or a put. I trade SPY options.

I threw this out there last night for entertainment purposes primarily, and, as it turned out, it turned out to be quite instructive for anyone who does like stock options. To each his or her own way to play these money games…

AMZN had a big move down (as history whispered it would). The 1995 Put, expiring Friday, from the open peaked during the day up 260% and ended the day up 161% (see the companion chart below). That’s somewhere between $26,000 and $16,000 on a small $$10K capital commitment. Not bad for a day trade? This could drop more tomorrow making that put even more profitable but come on…it’s a home run with no need to risk an overnight reversal.

And besides, moves like this happen again and again, nearly everyday, somewhere in the market.

I didn’t even notice TWTR. Market-timing, options-trading bears must have made some serious money there today.

(click on the charts for a larger view)

#MarketTiming – Summing up profits on a 10-day upswing

How important is long-term breadth to the swing trader?

It is a trigger to get into the trade and an answer to one of the most difficult questions in market timing and stock trading — When to get out?

Measured here by the McClellan Summation Index ($NYSI), this latest upswing began on the open of of 8/20 and closed on the open today, a 10-trading-day swing. See the indicator in the center band of the charts below).

On the swing, the 3xleveraged ETFs made solid gains for the 10 trading days: TQQQ up 8.6%, TNA up 5.7%, UPRO up 3.7%, FNGU 11.5%, SOXL 19.7%, FAS 2.8%, LABU 18.8%, ERX 4.6%. There were no losses in the group.

On the swing, among my “bellwether stocks” AAPL racked up a 4.9% gain, AMZN gained 7.3%, NVDA 15.9%, NFLX 14.3%, TWTR 5.6%. But there were also losers – TSLA down 2.1% , GOOGL down .9%, BABA 4.4%. BIDU 2.4% and FB down 2.5%. The entire basket was up 1.98%.

The top-ten stocks in my nifty-fifty list coming into the swing outperformed both of the above stock baskets with CRC up 38.4%, TNDM up 36%, PVAC up 4.8%, RGNX up 13.2%, WTI 15.1%, ARWR 4.6%, I up 2.9%, HLG 4.6%, TLRD 7.7% and the only loser in the group was MDGL down 3%. The nifty-fifty stock basket for the swing gained 12.48%.

How important is long-term breadth for the swing trader?

The “When to get out?” was today’s open for everything (market timing). As of the moment of this writing all of the symbols mentioned above are down with the exception of MDGL, the only loser in the nifty-fifty basket (that, I believe, is the market giving a wink to traders just for the fun of it).

Except for the fact we are still in a bull market, today’s breadth sell could have been a short. For aggressive traders, it was.

A main path to the “persistence, experience and discipline” it takes to be a successful trader is the trigger-in one is comfortable with and the trigger-out one is willing to accept without question.

(click on the chart for a larger view)

#SwingTrading – a serious swing through the weed patch

Marijuana stocks are the ruling weeds in the market garden on this upswing.


SWING TRADING TRIGGER – AUGUST 16TH

That was the technical trigger for the open three days ago.

The fundamental trigger came on the news Constellation Brands (STZ), U.S. distributor of Corona and Modelo beers, was investing $4 billion for 38% of CGC. All of a sudden, the Wall Street mob discovered it might be acceptable to pour money on the weed patch, particularly those springing up in Canadian gardens where marijuana has recently been made legal throughout the country.

As a result, of those traded in the U.S., CGC is up 26; a new IPO, TLRY, up33%; CRON, 27%. Even the most legitimate of the medical marijuana companies, the stalwart GWPH is up 3.6%. See the white flags on the lower right of each chart below which correspond to the cash and percent gained for each $100K invested.

Of particular note is MJ, up 10.7 percent, the sector ETF for the weed patch. MJ tracks the Prime Alternative Harvest Index, generally by holding many of these stocks and others traded on the Toronto Exchange.

(click on the chart panel for a larger view)

#SwingTrading – Up, down, sideways, sideways sideways…

It appears the market could go up tomorrow.

“Could go up”, I say that hesitantly because for end-of-the day swing traders like me, this has been a rather confounding week. On Monday, all of my swing signals (based on price, breadth, volatility) were on sells for Tuesday – Tuesday the intraday market went up. At the end of the day Tuesday all of the signals were on buys for Wednesday – Wednesday the intraday went down. At the close Wednesday, all of the signals were again on sells – today the market went up a lot.

Well, in SPY’s case it went back up into the Monday’s price range – in other words, sideways, sideways, sideways…

Although long-term breadth has not turned up, the low above a low in short-term breadth (see the circle on the upper portion of the chart below) usually will bring a bounce. That should happen tomorrow. And if long-term breadth turns up with it, the entire market could rally for a couple of weeks at least, which would be just fine and dandy.

If the market manages to put a final confounding candle on the cake tomorrow with a hard down day then…okay, I’ll say it, then we will have another indication a sizable bear may be stirring in its cave.

(click on the chart for a larger view)