August 17, 2017

Archives for October 2007

Nearing Oversold. Will We Get There?

Three out of the four major indices are bordering on oversold. However, the tech-heavy Nasdaq 100 (QQQQ) conntiues to push higher and is now at the opposite extreme of the other major indices as it is bordering on an overbought state. One note of interest, around this time I usually discuss the post-expiration bearishness that typically occurs the first two trading days following options expiration. Well, not this time. OVer the last 10 years, the trading day following October options expiration has been higher 10 out of 10. Wow! A push into oversold territory coupled with the aforementioned seasonal tendency could present a nice risk/reward setup. Over the last few months I have been battling with bouts of frustration, particularly … [Read more...]

Market Vacillates Wildly/Will Short-Term Bulls Step In?

The market vacillated wildly today which is not out of the ordinary given that it is the week of options expiration. The market gapped substantially higher at the open and then proceeded to decline lower throughout the day until the upside gap was closed. Once the gap closed the market settled down and began another upwards push. By the close the broad market S&P (SPY) and tech heavy Nasdaq 100 (QQQQ) were able to sustain gains of +0.3% and +64.7%. As a result, the indices that we follow remain in an neutral state. According to the next two days the Stock Trader's Almanac, the next two trading days are seasonally bullish with the S&P finishing higher 71.4% and 66.7%, respectively. As I have stated numerous times over the last few days … [Read more...]

October has been kind to all of our options strategies

The overall market has not quite reached an oversold state and by the looks of it I am not so sure that it will. After the closing bell some of the closely watched tech giants came out with postive earnings reports which have led to a substantial push higher in futures. If this holds we could see the typical mid-week, options expiration, positive bias. Going back two years, the S&P (SPY) has a bullish bias during the week of options expiration, particularly if you only include the trading days of Wednesday, Thursday and Friday. As I mentioned a few posts ago, 10 out the last 12 expiration have finished on the positive side of things. While the market has some catching up to do if it wishes to contniue the bullish trend, my guess is that … [Read more...]

The week of options expiration is upon us

Options expiration is upon us and as it stands all of our strategies, including our new SPY Diagonal LEAPS strategy, should finish up the cycle doing quite well. We still need to roll our October SPY short positions to November and will most likely do that over the next day or two. As I have stated numerous times over the past few weeks this is probably the most important aspect of the strategy so stay tuned to see how we negotiate the rollover. Theta has really kicked in as it is up to $44 a day. So far the strategy has made $1,194 or 6.0% over the last four weeks. We are very encouraged by the prospects of this strategy and how it allows us just another way to diversify our stock options strategies. Tomorrow brings "tech Tuesday". … [Read more...]

Time to roll, exhaustion gap and much more….

The sharp decline off the overbought levels on Thursday was followed by a decent bounce today. However, technically speaking it looks as though the "damage is done".  Yesterday's open looks like a typical exhaustion gap. An exhaustion gap usually comes at the tail end of a series of gaps during a rapid rise in the underlying, in this case the major benchmarks. The gap led to a new high in the S&P (SPY), but only for a few hours. Towards the end of the trading day SPY declined sharply to close the gap and close near the lows from the prior two trading sessions.Normally, this would not be much of an eye opener, but the force at which it came is alarming and must not be ignored. The sharp decline led to short-term oversold readings in … [Read more...]

Mr. Probability

Once again Mr. Probability was on our side. As expected the market took a bit of a breather today. The market gapped up today and then traded in a tight, sideways manner before investors locked in gains at record highs and consequently pushed the market lower. The gap up on 10/4 came close to filling today, but the S&P (SPY) managed to hold off the late day decline and bounce higher into the close. I am still on the sidelines (at least in my short-term trading) looking for a good risk/reward trade. As I have reported numerous times that while shorting "overbought", preferably "very overbought" measures are often difficult to gage because markets can remain in an overbought state for days and sometimes weeks. I did a study, … [Read more...]

Market remains overbought

Not much has changed. The major benchmarks that we follow remain in an overbought situation and a short-term pullback is still anticipated. The next two days are quite bullish on a seasonal basis according to the Stock Trader's Almanac. That being said, I am more comfortable, at least over the short-term, with the short side of the market. The market, more specifially the S&P (SPY) has vacillated in a fairly tight range over the last four days and typically when we see range-bound trading a sharp move is right around the corner. With the market overbought, an unclosed gap lingering, and the curse of the October 7's in play (discuss tomorrow)...well...I think you see where I am going. SPY Diagonal LEAPS Strategy Our new stock … [Read more...]

Market in an overbought state once again….where to now?

Daily Commentary The market traded sideways until the much anticipated Fed Minutes were released at 2:00 EST. Once the minutes were released the market surged higher and never looked back. Now the major market benchmarks are back into an overbought to very overbought state. The Nasdaq 100 continues the push higher, but is near an extreme. This is exactly the set-up that we mentioned in our newsletter (paid subscribers only) this past weekend. Typically, when an indice reaches this type of extreme we see a short-term pullback. I admit, the recent surge has been frustrating for my trading. I am not a momentum trader so the recent surge has tested my patience. While frustrating, I remain patient because I know over the long haul I … [Read more...]

Divergence in the major benchmarks

The broad market index (S&P) gapped lower today today and never looked back. The push lower moved the major indices we follow back in a neutral state. Interestingly enough, the tech heavy Nasdaq 100 (QQQQ) surged higher creating a short-term divergence that will most likely settle out over the coming days. The move lower was to be expected given the reasons I stated in the blog Friday. Tomorrow and Wednesday bring bearish seasonal days and then the market ends the week with two historically bullish days. This is one of the few weeks of the year, according to the Stock Trader's Almanac, that the market experiences four days with historically significant bullish/bearish seasonal tendencies. As I always say, I never use seasonal tendencies … [Read more...]

SPY Diagonal LEAPS strategy off to a great start! Short-term pullback in sight? ETF Extremes watch…

The market rallied mightily today with nary a pause. Typically, the market will fade a bit, if only to fill the upside gap, but not today. The market moved steadily higher throughout the afternoon and then pulled back a tad at the close, but that was most likely a result of traders taking some money off the table ahead of the weekend.  Now all of the major market benchmarks that we follow are back in an overbought to very overbought state and the shorter-term measures that we follow have reached an extreme state. Typically, when the market reaches this type of an extreme we see a short-term (1-5 days) fade in the indices. Furthermore, sharp moves after payroll reports tend to fade back a bit in the coming days. In addition to the … [Read more...]