Is it Over?
October 30, 2011
The market continues to amaze.
The rally has been furious and fast. In less than four weeks, the Dow has risen 14.8 percent from its 2011 low, reached on Oct. 3. The S&P has gained 17 percent. The rally has been historic. If tomorrow holds 3% on the S&P, the major market benchmark will set the performance record for a one-month time frame.
While I mentioned that the market was short-term oversold towards the beginning of the month I never thought the market would rally this far, this fast. The S&P pushed through 1200, then 1220, followed by 1250 and now it sits at 1285. Amazing!
But, now we are at a very important area of strong overhead resistance at 1300. My guess is that we will take a breather for the next 5-10 days and pullback to possibly the 1220 area before the end of the year “Santa Claus” rally begin to take shape.
Once the New Year passes, well, I think we could see more doldrums, but that is way too far out for me to discuss right now.
All of the major benchmarks and most of the sector ETFs I follow have pushed into a short-term “overbought” to “very overbought” state, so I expect to see a short-term pullback as we head into next week. However, the one piece that could hold this market up over the next few days is the overwhelmingly strong seasonal bullishness that resides during the end of October/beginning of September. Once the seasonality passes it is back to a tug of war scenario with 1250 on the S&P being the first area the bulls need to defend.
But for now let the bulls rejoice. But know, that the risk/reward is now pointing towards the downside.
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
There are several ETFs that are in a short-term “overbought” to “very overbought” state and as a result I will most likely be placing a few trades in the Theta Driver Options Strategy as well as the High-Probability, Mean-Reversion Options Strategy.
Subscribers to each strategy – STAY TUNED!
Options Indicator
Another Great Week for the Bulls – Position-Sizing is the Most Important Aspect of Trading
October 28, 2011
More Downside To Come?
October 25, 2011
Today was a banner day for the High-Probability, Mean-Reversion Options Strategy. The IWM puts that I purchased near the close yesterday closed the day up 27.9% and if we continue to move to the downside tomorrow, which looks highly likely we could see even greater gains.
My thought is that we will close the gap in IWM, DIA and SPY that occurred last Friday. This would take the major market ETFs to $69.73, $115.77 and $122.10, respectively. If we happen to close the aforementioned gaps then the next move could take the major market benchmarks down to close the gap from 10/10. A move like this over the next few weeks would lead to extraordinary gains in the strategy. A move to close the gap from last Friday could lead to us to a break-even or possibly, yes possibly a slight gain for the month. The chances for the latter or not likely, but that is okay. This is a long-term strategy and the occasional losing month is expected. Remember, this is a marathon and not a sprint.
As for the Theta Driver Options Strategy it continues to chug along nicely. I am enthused by the wave of reviews by all of you. I still have a few spots left so if you are interested give it a try. It is free for 30 days. What do you have to lose?
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Major Benchmarks in a Short-Term Overbought State
October 24, 2011
I am keeping it very short tonight as I am just not feeling up to snuff. My effort to eliminate caffeine from my daily regimen is taking its toll tonight, but hopefully this pounding headache is short-lived.
Anyway….
The market has pushed into another short-term overbought state and as a result I placed a trade in the High-Probability, Mean-Reversion strategy. I still have two prior trades on, so this is the third open trade in the strategy. My hope is that the market takes a reprieve from the short-term overbought state over the next week so I can close all three positions.
I will you with this tasty nugget from Sentimentrader.com’s own Jason Goepfert:
“We mentioned last week that the Monday after October option expiration had been up every year for the past 14 years. Make that 15 now.
There were 7 times that the Monday was up by more than 1%, as it was today. During the next week, the S&P sported a positive return only 1 time, and its average was -2.1%. The maximum gain during the next week averaged only +0.7% while the maximum loss averaged -2.5%.”
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
October Options Expiration Can’t Come Soon Enough
October 20, 2011
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Kindest,
Andy
Options Indicator Signals Tech Overbought
October 18, 2011
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
Short-Term Reprieve Occurs – Will It Continue?
October 17, 2011
The short-term reprieve that I mentioned in the Free Weekend Report (Sign-Up Free Here) occurred today and by the looks of it we could see more downside tomorrow.
As I mentioned in the report “as for the current technical picture, the all of the major indices and most sectors are in a short-term “very overbought” state as we head into the week of options expiration. Not only are the major benchmarks in one of the most short-term overbought states that we have seen in quite some time, but we are now hitting strong overhead resistance with two unclosed gaps directly underneath. Combine all of the aforementioned and you can quickly see why the risk/reward scenario leans heavily towards a short-term reprieve next week.”
Now all of our Theta Driver Options Strategy look to be highly profitable. We have one that is to reap the full credit at October expiration Friday and the trade we added last week is now well below the short strike for the November expiration cycle.
For all of you not aware of the Theta Driver Options Strategy, it is a strategy that I have been using for years that due to high demand I recently incorporated into my strategy line-up. It involves the most powerful options strategy there is – credit spreads. More specifically, bear call spreads and bull put spreads. I am able to choose my own probability of success and as well as my rate of return. This is a new way to trade/invest for most investors, so if you have any questions please do not hesitate to email me. I would be more than happy to answer any and all questions that you might have.
Anyway, tomorrow should also bode well for all of our positions as IBM came out with weaker than expected numbers and as I write this futures in all of the major benchmarks are lower. With Apple (Nasdaq AAPL) due out tomorrow after the bell we could see a quick move back to the middle of the two month range that we have been trading in. If the decline holds tomorrow as AAPL reports number that for some reason do not please Wall Street then we could close the 10/10 gap that was established in almost every ETF. In reality the gap is not that far away. IT would only take a 2.5% move in SPY over the next few days for the gap to close. After a 14% rally in nine days a pullback of that degree would not be that out of the ordinary.
Remember, only two weeks ago the market was in free fall mode. Nothing has changed since that point in time. Yes, the heads of the EU mentioned that they were going to make a plan for a plan, but so far nothing has come to fruition. We are all supposed to know something on the 23rd, but until that point the bearish underlying economic factors remain the same.
Links of Interest
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
High-Probability, Mean-Reversion Options Strategy
October 14, 2011
I hope all of you with a bearish lean are surviving this absolutely crazy market. I know that it has been the most difficult month for the High-Probability, Mean-Reversion Options Strategy in since its inception. The ongoing nine day rally has pushed both of our positions in losing territory, yet I am still confident that the performance will improve as we move towards the latter part of the month. No one said trading was easy, especially options trading, but it is all about perseverance . As for the Theta Driver Options Strategy we are well on our way to the third straight month of gains.
All of the major indices have moved into short-term “very overbought” extremes, while hitting strong overhead resistance. Moreover, we have two large unclosed gaps in all of the major benchmark ETFs. Combine all of the aforementioned and the high-probability move leans heavily towards the downside. But, as we have seen over the past few weeks the market sometimes has a mind of its own.
I will be back with a lengthier discussion in the weekend report due out Sunday, including the overbought/oversold indicators. Stay tuned!
Kindest,
Andy
Options Offer Tremendous Opportunities
October 13, 2011
I am always amazed how large the opportunity to “make it big” factors into the great magnetism of the market. The belief that anyone, from any background can be successful and make tons of money has quite the allure. But, in all of this euphoria people neglect to think about all of those that failed before them. And believe me the failure rate is high. Yet, investors/traders continue to choose the most difficult of investments to trade – stocks. Stock-only traders are at a complete disadvantage because they have no way to trade the randomness of the market. They have a 50/50 chance of success for each and every trade.
Bottom line – stock investors/traders are truly at a disadvantage.
Again, stock investors only have two ways to make a profit: buy a stock or short a stock. And most retail investors are not willing to short a stock, so basically they are only able to profit in one direction – up.
Another characteristic that stocks have is that they don’t have an expiration date like options. I know some of you are probably rolling your eyes right now. How could something that expires be more attractive than something that can be held to perpetuity?
Well, we all know about the marriage that many of us have for our beloved stock positions. A plan to end the investment/trade often doesn’t exist because the stock goes up and you hold it and then it goes down and you hold it even longer an if it continues to go down you hold it for that much longer hoping that your position will eventually come back to break-even and even then most decide to exit the position.
Just think of all the missed opportunities. It drives me absolutely insane to think about it. Your capital could have been used for so many other opportunities. Also, an expiration date forces options traders to truly think about the risk/reward of each and every investment /trade. Furthermore, it forces the options trader to think about the future in greater detail. It also forces you to think about the risk/reward of every trade.
Remember, when you buy a stock, you have the entire amount of your capital at risk and more importantly you have dedicated a large portion of capital to the trade. With certain option strategies you could have a tenth of the capital tied up.
Of course, there will always be the foolish guy who has dedicated as much on one options position as they would in a stock position., They don’t understand the importance of position-sizing. A basic rule that I like to use is that if I become too emotional about a losing trade then I have too big of a position on.
I know this has been a post full of random thoughts and I apologize, but I just wanted to communicate a few quick thoughts that might be helpful to a few of you.
Kindest,
Andy
Links of Interest
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
High-Probability, Mean-Reversion Indicator – Short-Term Reprieve Looks Imminent
October 11, 2011
It was another day of sideways trading. The market was able to hold gains for yet another day which was impressive given the short-term overbought extremes, strong overhead resistance and yesterday’s huge upside gap.
I am still leaning towards a close of the upside from yesterday which would bring SPY down to $117.25, DIA down to $112.21 and QQQ down to $54.66. I would expect that this occurs over the next 2-3 days, but Mr. Market always has a way of playing games with what should be obvious price levels.
I found an interesting nugget from Jason Goepfert of Sentimentrader.com today. “According to Bloomberg , at least 500 more stocks last traded on an uptick than a downtick on each session during the past week. The 5-day average of the closing reading is now over +900. While the S&P 500 was trading below its 200-day moving average, this has only happened 3 other times (10/16/01, 11/28/08 and 3/18/09). All three saw the S&P drop at least -3% during the next 2 sessions, though there was nothing consistent about them after that.”
A 3% drop would certainly close the gap that I have mentioned over the past couple of days and would be highly beneficial to our current trades in the High-Probability, Mean-Reversion Strategy and the Theta Driver Options Strategy.
Links of Interest
If you haven’t already, don’t forget to sign-up for my :
High-Probability, Mean-Reversion Options Strategy : Free 30-day trial
Theta Driver Options Strategy (limited room available): Free 30-day trial
Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.
