August 17, 2017

Can the Dow (DIA) Continue at this Pace?

I think the answer is obvious. The Dow pushed higher for the 10th consecutive trading day. The Dow hasn't seen a streak like this in over 17 years. Three months into the year, the Dow has shot up nearly 11 percent while the S&P 500 has gained 9.6 percent.                                     For those of you familiar with the normal distribution model, the Dow is on now firmly entrenched in the  tail portion of the curve. Basically, when we see a streak like what we are currently witnessing in the major market indices a correction is not far behind. Think about it for a second. The … [Read more...]

When Trading Options Use Probabilities to Your Advantage

I am often amazed by the  lack of common sense when it comes to investing. Investors seek the best possible information, unfortunately most turn to the wrong sources. For starters, turning on the television for investment advice, in most cases, is a big no no. Yet, how many people listen intently to the daily drivel coming out of screaming mouths on CNBC. Investors, particularly traders, should know that every trade spouted from these sources have a 50% chance of success. Add in transaction costs and the probability declines further. Yet, the majority of investors and traders take this approach, mostly because they aren't privy to any other form of investing. Self-directed investors aren't aware that there are strategies based purely … [Read more...]

High-Probability, Mean-Reversion Indicator Screaming Short-Term Overbought

As the old Wall Street adage goes, "don't sell a dull market". The S&P 500 came into the holiday shortened week in a short-term "very oversold" extreme. So the bounce this past week came as no surprise. It was the magnitude of the bounce that surprised many. The S&P as seen through SPY climbed 3.7% in a little over 3 days. But now, the bears are salivating as the pot odds move back to their side...at least over the short-term. As seen in the chart below, not only SPY, but all of the major market ETFs have pushed into a short-term overbought state. Moreover, several sectors have moved into a "very overbought" state. Couple the aforementioned extremes with strong overhead resistance and you can quickly see why the bears … [Read more...]

Updated High-Probability, Mean-Reversion Indicator

For those of you who use the High-Probability, Mean-Reversion Indicator on a daily basis, you will quickly notice that I have altered the list a bit. I decided to alter the list to reflect the ETFs with the most liquid options markets. The list is fairly comprehensive, but if you notice have other ETFs that you would like for me to include send me an email. Just remember, the options on the ETF MUST have a efficient options market noted by a tight bid-ask spread. If you haven’t already, don’t forget to sign-up for my : Free Weekly Options Report High-Probability, Mean-Reversion Options Strategy : Free 30-day trial Theta Driver Options Strategy (limited room available): Free 30-day trial Twitter? Join Here. Also, for … [Read more...]

Traders Rejoice?

Nope. Yet again, the bears stumbled mightily during the final hour of trading. As Jason Goepfert of Sentimentrader.com stated, "The late-day rebound saved the indexes from suffering what could have turned into a relatively large down day.  That marks day #30 so far this year without a 1% down day, the 14th-longest streak since 1928." It is expiration week, so moves like today's are to be expected, but the price action today was indicative of the last several weeks - down at the open rally towards the close. The low volatility market has been frustrating for most traders as most of us tend to take short positions as the rally moves further and further into the outliers of the bell curve. We all know there is the inevitable … [Read more...]

One More Time – Bulls Look Ripe

NEW YORK (AP) -- Stocks had their worst day of the year Friday after Greece hit a roadblock on its way to a critical bailout. Seriously, with a headline like Stocks fall sharply as Greek deal is held up you would think that the Dow just lost 300-500 points. Nope, just a paltry 0.71%. Yes, let me repeat 0.73%. The worst day over the past 2 ½ months has been 0.73%. Okay, so with that being said, in which direction do you suppose the market will move  over the short to intermediate-term move? Would you say the risk is now to the upside? Do you think probability lies with the bulls or bears after an average years worth of market gains in just 28 trading days? As most of you already know, almost every indicator I follow, both technical … [Read more...]

Excited for the Week Ahead

As my loyal readers already know, almost every indicator I follow, both technical and sentiment, is bearish. But, something  today made me particularly happy. More food for thought. If you haven’t already, don’t forget to sign-up for my : Free Weekly Options Report High-Probability, Mean-Reversion Options Strategy : Free 30-day trial Theta Driver Options Strategy (limited room available): Free 30-day trial Twitter? Join Here. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE. Kindest, Andy … [Read more...]

Allow Yourself a Margin for Error – Trade Credit Spreads

Okay, I think we all know my bias at this point. For those who don't, it's bearish. I am not going to bother going into why I am bearish. Just read my posts from the last few weeks to truly understand why I am currently bearish. So, I want to talk about something more important today - strategy. More specifically options strategies. With options, you can control with precision, the amount of risk and type of risk you wish to take in any given trade in any situation. One of my favorite strategies is selling vertical call/put spreads like in the Theta Driver Options Strategy. Let me explain. And please understand I am keeping it simple for conceptual reasons. Once, you understand the basics we can really dig deep to understand … [Read more...]

The Grind Higher Continues….For Now

As you all know I have had a bearish tone since mid-January. The market had moved into a short-term overbought state, excessive optimism had pushed into the market and seasonality had entered a historically bearish. And over the past several weeks all of the aforementioned have pushed further and further into a bearish state. But, the bulls have yet to waver and the grind continues. Since December 19th the S&P 500 (SPY) has climbed over 12% without pause. However, as we all know this is how it works, the market grinds higher and crashes lower. It's like stacking pennies and now the stack has reached 50 pennies high and it's teetering. I am not calling for a crash. But let's be real. The market can't sustain this push. Of … [Read more...]

Some Interesting Probabilities Surrounding Payrolls

Will the beginning of the "anticipated" correction come tomorrow? The Nonfarm Payroll report is often a market mover and I expect to see much of the same tomorrow. The market is wound tight and typically when that occurs we are witness to a large directional move. I expect, regardless of how positive (or negative) the report is tomorrow, the market will push lower. As most of my loyal readers know (and thank you all for the amazing support by the way) there has not been a shortage of bearish indicators as of late. Over the past two weeks, with volatility drying up (VIX now in the low 18's) due to the tight trading range over the past two weeks, bearish indicators have piled up and have reached extreme proportions. I compare it … [Read more...]