August 24, 2017

Archives for August 2007

Post Labor Day Trading

August is finally over and for most of Wall Street the end did not come quick enough. Before we get too excited I must point out that there could be more pain ahead for the bulls. Over the last 50 years September has been the worst performing month for the S&P. If I decrease the time frame to 15 years the results are roughly the same with August barely beating out September for the worst performing month of the year. If I decrease the time frame I still manage to get dismal results as the past six years have been witness to overwhelming weakness with an average return of -5.9%. As dismal as of this sounds, we are actually excited by the new month . September should bring some wonderful opportunities for our ETF Extremes strategy. The ETF … [Read more...]

Short post again tonight. I am trying to work on the Insider's page of the site which should be updated in the next few weeks. Also, I am working on a few new portoflios involing LEAP spreads. I was planning on introducing them this week, but I thought this was unfair to my paid subscribers, so I will introduce it to them first with guidelines and will report to my loyal blog readers next week. I established the positions earlier this week and I will post everything, including a few graphs next week. Be prepared to learn about the Greeks. As I stated yesterday Friday brings one of the more consisitent seasonal biases. Over the last 50 years the trading day prior to Labor Day has been higher 75% of the time with an average return that … [Read more...]

Riding the Seasonal Wave

If you happened to trade the historical seasonal tendencies this week you would certainly have a fatter wallet as a result. Which brings me to tomorrow. Over the last ten years, the 22nd trading day of August (Thursday), the Dow and S&P have only experienced positive days once. If we go out 21 years, according to the Stock Trader's Almanac, the S&P and Dow have only been higher 38.1% and 28.6% of the time on the 22nd trading day. However, we must remember that just because the day historically finishes lower, this does not necessarily mean that the losses were significant enough to warrant a trade. After further investigation, since 1950 the average return on the 22nd trading day of August is roughly breakeven. Furthermore, with the … [Read more...]

Sell-off Continues

Not much to say tonight so I am going to keep it very short tonight.  As expected, the sharp sell-off at the close yesterday carried over into today's trading. As a result the S&P experienced its largest loss since August 9th. Tomorrow brings a bit of positive sentiment in an otherwise historically dismal week (look at Aug 27th post). However, we could see a test of the 1425 area in the S&P before a short-term bounce occurs so who knows if the psitive seasonality takes hold. As I always say, historically biased seasonal conditions are, in most cases, never a reason to place a trade. Although, when coupled with other technical indicators, seasonal factors can be a worthy compliment to making an well-informed trading decision. If the … [Read more...]

Bearish seasonal weakness coupled with overbought conditions often spells trouble

Last week I stated that we should see some short-term weakness going into this week and that is exactly what we saw today. Moreover, by the way the market finished the day we could see a continuation of the weakness tomorrow. As the saying goes "professionals rule the close" and a weak close often carries into the following trading day. The weakness was not unexpected. Overbought conditions from the initial bounce off the recent lows, and seasonal weakness (according to the Stock Trader's Almanac the "end of August has been murderous 6 out of the the last 10 years" with the "average loss for 5 days:Dow -2.6%, S&P -2.3%, and the Nasdaq -2.1%) looked to be problematic for the bulls. Furthermore, on a historical basis tomorrow (the 21st … [Read more...]

New portfolios next week – follow and learn our new Stock Options Strategies for FREE in the blog!

Due to the 5-week cycle in the September expiration cycle I will establish a position next week (4 weeks out). At the same time I will also establish a similar position in SPY so that we can compare how the two react to the market on an individual basis. Also, next week I will begin the SPY LEAPS strategy which I will discuss in great detail in the daily commentary section. I will utilize the paper trade tool in Thinkorswim to accurately report all of the details including greeks, etc. Stay tuned The resiliency of the market this past week certainly surpised me. However, given all of the reasons I stated in yesterday's post I think we should see some short-term weakness next week. Let me repeat what I stated. First, going back … [Read more...]

Market Holds, But For How Long?

Given the magnitude of the short-term bounce, the market has done a remarkable job staying afloat. However, I think the short-term holding pattern could be coming to a close over the short-term (1-5 trading days). Why? well ,there area few reasons why I think a test or at least a short-term decline is near. First, going back 20 years in the S&P, every bounce off a major low (if we indeed hit one recently) was brought back to reality. Each instance saw the major benchmark, S&P move lower to test the recent low. Many have compared the price action recently to that of the correction that began in late February. The market bounced for several days, but ultimately came right back down to the established. My guess is this type of action will … [Read more...]

Russell Officially Hits Overbought Status

I reported yesterday about the how the market was entering a short-term seasonal bullish period and the precedent ceratainly did not disappoint today. After a nice gap up the market vacillated in a fairly tight range for most of the day and then began to rally with 45 minutes left to the closing bell.   As I write this the futures have spiked significantly higher. If the upward momentum holds into the opening bell we could see the shortest-term oversold/overbought indicator we follow (not published) hit an overbought extreme. If you notice below most of the indices we follow are nearing an overbought situation. Since the low established last Thursday (137.00 on SPY) the market has gained $9.65 without nary a pause so an overbought … [Read more...]

S&P Stuck in a Range

Over the last couple of days the S&P (SPX) has traded between 1430 and 1450. Typically, the longer an underyling, in this case the S&P, trades in a defined range the more violent the breakout. On a strictly seasonal basis, tomorrow is a fairly bullish day with the Dow, S&P, and Nasdaq finishing the day in the black 66.7%, 61.9% and 76.2% respectively. However, technically speaking, the shorter-term indicators we follow are suggesting that a short-term top is near and a pullback looks possible. As for the magnitude, who knows, but the 1430 area should be watched closely. A break below this level could bring talk of a retest and sellers will most likely oblige and attempt to push the market lower. I mentioned the iron condor yesterday … [Read more...]

The Week After – SPY Iron Condor

The September expiration cycle is a five week cycle. According to our guidelines in the Iron Condor strategy we will not establish a position next week. We prefer to only go out a maximum of four weeks. We will also begin to following another iron condor strategy using SPY as its underlying. We would like to see how the SPX and SPY (both follow the S&P 500) differ, premium, price, greeks, volatility, etc. This should be a wonderful oppportunity to further explore the intricacies of the iron condor strategy. My goal is to weigh the pros and cons of each underlying in an open forum so that we can better understand how each react to the market. Last expiration period was again, not so kind to our iron condor strategy. We have had … [Read more...]