August 17, 2017

Is This the Beginning?

A Few Random Thoughts I can't remember how many times I have seen 300 point opens in the Dow futures. The rally today was strong. The talking heads will attribute the advance to Europe or a piece of economic data, but in reality the pop came on the heels of one of  the lowest short-term oversold readings in years. As a result, the probability of a short-term advance was extremely high. Last week the market lost over 4% in just over 3 1/2 days on extremely low volume. The entire move displayed very little conviction. Bullish? Yes, I think this move could extend itself for several weeks as Santa Claus and his typical holiday rally looks imminent. Add the fact, that seasonally we are entering one of the strongest periods of the … [Read more...]

Thank You Papandreou

I am going to keep it short and sweet tonight. I am amazed at just how many people I know that have turned bullish. Seriously, bullish? Absolutely, nothing has changed since a few months ago, if anything we have more clarity as to why this recent bounce was just a bear market rally. This euro crisis is far from over and I still think that the gap from 9/1/10, yes 9/10 is going to close before we move substantially higher. But, people are easily swayed by a sharp rally. So, as I type this futures are substantially lower, again. And, my guess is that the selling continues throughout the evening and into the open tomorrow. Check out the following vid: Easy Come , Easy Go If you haven’t already, don’t forget to sign-up for … [Read more...]

Back in a Neutral State. Where Now?

The market moved decisively lower today and while most think it was just a normal decline I think there could be more ahead. Tim Knight of Slope of Hope recently stated that he thought the 1223 area on the /ES would act as a strong area of support and I think he is correct in his assumption. If we break that area then I would expect to see a decisive decline as we head into December. The true test will be once the market reaches its next short-term oversold state. If the bounce is violent then, yes, I would expect to see another push higher into November expiration. But, if the the bounce is weak, then bears should have good reason to rejoice as another swift decline could be in order. If you haven’t already, don’t forget to sign-up for … [Read more...]

High-Probability, Mean-Reversion Options Strategy

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 … [Read more...]

High-Probability, Mean-Reversion Indicator – Short-Term Reprieve Looks Imminent

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 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 … [Read more...]

Options Trades in the High-Probability, Mean-Reversion Strategies

A trade in the High-Probability, Mean Reversion Strategy looks likely if IWM happens to open flat or open tomorrow. Of course, there are a few other thng is that need to line-up, but the first trade of a slow August seems likely. Subscribers stay tuned! Our latest Theta Driver Options trade looks very good. Last Monday, I placed our first trade for a credit of $0.25 and thanks to some help from the bears (although a flat to slightly higher market would have worked as well, just not so quickly) the credit spread is now worth less than $0.05. With only $0.05 and 25 days left until September expiration I will mostly likely lock in the gain for roughly a 9% gain (including commissions) and place another Theta Driver trade within the next few … [Read more...]

Buy and Hold is A Crock – Cash is a Position – Diversify Through Strategies Not Stocks

The major market averages continue their struggle to push higher over the past three trading days. I still think the market pulls back to close the 9/1/10 gap over the next few months. However, as I always say, all of the noise truly doesn't matter to me, I trade market extremes and volatility. So, it doesn't matter to me where the market goes or how it performs over the long-term. These are uncertainties that have zero statistical advantages. I don't diversify in stocks - I diversify in strategies. This is how to effectively invest your money. This is why I use the High-Probability, Mean-Reversion Strategy and the New Theta Driver strategy. It exposes me to a limited number of days in the market. I am often in cash. I only trade … [Read more...]

Gold Hits a Short-Term Extreme

*Over the short-term Gold (GLD) has pushed into 'very overbought' extreme which could trigger a trade over the next few trading days. If gold happens to move higher and thereby push further into 'overbought' territory I will most likely enter a trade over the next few days. As always, subscribers, be on the lookout for a real-time trade alert and tweet of the trade. New Credit Spread Options Strategy – Beta The market moved lower again today and the Russell 2000 (IWM) is now 4.3 percent below the 86 strike. I sold a vertical spread with 53 days left until August expiration for a $.34 credit and now the spread is worth approximately $.45. The two week rally that occurred during the latter part of June/beginning of July sent the price … [Read more...]

What is an Option? More Importantly, How Do I Trade Options?

What is an option you ask? More importantly, how do I use options to enhance my portfolio returns. The second question is by far the more difficult question to answer because it requires a personal look into how you see yourself as an investor. One thing I I can guarantee - there is an option strategy that exists that you will cater to your needs. Whether looking for a pure hedge to your current stock positions, a super aggressive weekly call or put options or somewhere in the middle, you should be using options to assist your investment needs. If you don't you are making a huge mistake. Yes, I agree - there is a lot of bulls$%^ options services out there touting outlandish gains. 500% profits in 2 days, 912% profits in one day, etc. … [Read more...]

Potential Options Trade – Short-term Overbought

Market Mumbo Jumbo The market moved higher today and pushed a few of the sector ETFs near a short-term overbought extreme. According to Jason Goepfert of Sentimentrader, "Tuesdays are good "bottoming" days, and June is a good bottoming month.  The 14th and 15th trading days of the month are also higher-probability days for a low". Moreover, the week after June option expiration has been negative 72 percent of the time since the inception of the S&P 500 futures.  Every one of the past 6 years has been negative during this week. As the market moves ever closer to a short-term overbought I expect another test of the recent lows in SPY. A gap higher at the open in SPY and I will most likely take the first position of the month in … [Read more...]