July 31, 2014

Fedspeak and the Aftermath

For those of you who don't already know the Fed decided to lower rates by a quarter-point to 4.50%. It was the second straight reduction this year. As expected, immediately following the announcement the market experienced several violent whipsaws only to finish the trading day substantially higher. The S&P (SPY), Dow (DIA) and Nasdaq 100 (QQQQ) finished the day higher 1.0%, 0.8%, and 1.4%, respectively. Now What? Did you notice how the bond market responded to the announcement? The benchmark 10-year Treasury note spiked after the news and advanced over 2% by the end of the trading day and 4.4% since late Tuesday. Historically, when we see the S&P up over 0.5% and the 10-year Treasury notes up over 1% following a Fed … [Read more...]

Sitting On Hands

Traders locked in a few profits today as tomorrow brings the highly anticipated Fed announcement. Expect to see price action fluctuate for a brief period following the opening bell and then settle into a tight trading range as the market moves closer to the fed release. Once the FOMC statement is released expect to see a whipsaw effect occur. Many novice traders get caught in the wild price action that follows a release quickly realizing that "sitting on hands" was a much better approach. The risk/reward is just too high for me in this type of situation. With the plethora of high probability set-ups that will present themselves over time why would I risk my money on a straight gamble. I prefer to wait until the market has worked … [Read more...]

Seasonally Bullish

Before I move into today's price action and what the next few trading days look like I would like to reiterate the overly bullish seasonal conditions that the market has entered. The last three days of October and the first three trading days of November are overwhelmingly bullish. Going back over the entire history of SPY (12 years),  not once did the aforementioned time frame finish lower. Furthermore, the Stock Trader’s Almanac has the six days marked with a bull symbol. This signifies favorable seasonal conditions with the S&P finishing the days higher 66.4%, 81.0%, 61.9%, 71.4%, 66.7%, and 61.9%. It is the longest string of “bull symbol’ days in the must-have reference. The market traded in a fairly tight … [Read more...]

Sunday Links – October 28, 2007 Edition – The Week Ahead

Sunday Links - October 28, 2007 Edition - The Week Ahead Random Thoughts Bespoke provides Key Earnings Reports for the week ahead Srividhya Sivakuma dabbles in derivatives - strategies to hedge equity risk Schaeffer's gives the public another wonderful tool - put/call open interest Adam is up to his old VIX Tricks again - A must read! Options are growing socially? Strategy of the Week Thinkorswim gives us a lesson on - all things vertical. Essential Tools Check out the Free position simulator offered by our helpful friends at the Options Industry Council (under the trading tools tab) Food For Thought Another must read by Trader Mike - Position Sizing Please do not hesitate to email us with any … [Read more...]

Seasonal Phenomenon Upon Us – New “Weekend Report” Sunday!

As I stated yesterday, a notable seasonal phenomenon is upon us. The last three days of October and the first three trading days of November are overwhelmingly bullish. Going back over the enitre history of SPY (12 years),  not once did the aforementioned time frame finish lower Furthermore, the Stock Trader’s Almanac has the six days marked with a bull symbol. This signifies favorable seasonal conditions with the S&P finishing the days higher 66.4%, 81.0%, 61.9%, 71.4%, 66.7%, and 61.9%. It is the longest string of “bull symbol’ days in the must-have reference. I will be back later this weekend (most likely Sunday) with a weekend report of sorts. I want to use it as a reflection of the prior week and the trading week … [Read more...]

Strong Seasonal Winds Blowing In

With only four trading days left in October will we see the historically bullish seasonality that occurs during the last three days of October and the first three trading days of November. Going back over the entire history (12 years) of SPY (S&P) not once did the aforementioned timeframe finish lower. Furthermore, the Stock Trader's Almanac has the six days marked with a bull symbol. This signifies favorable seasonal conditions with the S&P finishing the days higher 66.4%, 81.0%, 61.9%, 71.4%, 66.7%, and 61.9%. It is the longest string of "bull symbol' days in the must-have reference. Given the recent price action and the bulls ability to keep the benchmark S&P above its 50-day moving-average I think the seasonal winds could … [Read more...]

Chop Chop

What a day! Heavy selling pressure stepped into the market early and often and the sharp decline looked like it might continue throughout the trading day. However, towards the end of the day a rumor floated through the ears of Wall Street; the Federal Reserve, scheduled to meet next week, could initiate a rate cut before the already highly anticipated meeting. The news immediately led to an intra-day rally, which was compounded by shorts quickly covering their positions. At the close, the Dow (DIA) had pared its intra-day losses to finish the trading day flat. The flat day led to another day of neutral readings in the benchmarks we follow. As far as short-term edges go, there isn't one. Of course this could quickly change … [Read more...]

Market Neutral, Condors and Diagonals

The short-term bounce that I first spoke about late last week seems to have exhausted itself. The short-term bounce could continue, but the high risk/reward position of the trade seems to have faded as prices have risen.   The market still seems a bit heavy to me here. I know the market has performed exactly as it should have after the new-high correction, but there are a few underlying indicators that are starting to make their way to the forefront, at least over the short-term. The Nasdaq 100 (QQQQ), which is often viewed as a leading indicator, is once again nearing a short-term overbought situation. Moreover, the upside gap in the tech-heavy QQQQ also went unclosed. Couple the two aforementioned situations and I think … [Read more...]

November Expiration Cycle Begins

The November options expiration cycle stared with a bang today. The sharp decilne last week carried over into this week as the market opened the day substantially lower. Buyers stepped in immediately and the gap to the downside was filled within a few hours of the opening bell. Two of the major indices we follow (SPY and DIA) are still in an oversold state so I would expect to see some follow through to the short-term bounce tomorrow. We also established our November position in the Iron Condor strategy with an enormous 260 point range. Last month we brought in the same amount of credit with only a 200 point range. Thanks to Mr. Volatility's recent jump we were able to extend the range to 260 points over the next four weeks for the same … [Read more...]

Sell In May Revisited and Indices In A Very Oversold State

Before I delve into the options strategies we follow and how the performed during the October cycle I would like to  touch on a post that I write back in late April/early May of this year. On 5/3  I first spoke about the old Wall Street adage "Sell in May and go away. As many of my loyal readers know, I mentioned it several more times over the course of the next few months. On 5/4, when the market officially moves into the aforementioned adage, the S&P (SPY) was trading at $150.75. Today the S&P (SPY), closed at $149.67 lower -$1.08 or -0.7% since the "sell in May" period began. Once again, the seasonally flat period between May-October proves it merit. Okay, back to today's market action. Whew! More than a handful of … [Read more...]