August 17, 2017

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...]

More Downside To Come?

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 … [Read more...]

Short-Term Reprieve Occurs – Will It Continue?

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 … [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 Trading Requires Patience

Market Mumbo Jumbo Yesterday, I stated the rally could be short-lived. The S&P 500 (SPY) moved lower to close Tuesday's upside gap and kept moving south as the trading day progressed. Not a good sign for the bulls. However, until the $125 level is broken the bulls remain in good standing. A push below $125 and I think a waterfall, capitulation type move could occur. If a sharp decline occurs I would suspect that SPY will see the 12/1 upside gap close at $118.03 (the high from 11/30). Again, as long as SPY is able to hold the March lows I think the market will be okay. Although, when I say okay, I mean a move back near the top of the established trading range – $125-$137. Let the range-bound trading begin. Options Indicator – … [Read more...]

Yes, it is finally over!

Just a quick post: The month is finally over. The improbable 9% gain in the S&P was, well, the best on over 70 years. Oh yeah, historically, September is the wort month for the market.  History certainly did not repeat itself in 2010. I have had a short position (puts) in the S&P (SPY) for several weeks now and I have added them at various times throughout the month at various strike prices. Currently I hold puts at the 112, 113 and 114 strikes. So, of course, As you can probably deduct, I am still anticipating a short-term decline that should take us down to the $111.02 area on the SPY and close the first of several gaps that exist beneath the major market benchmark. However, I must say that my stance is being tested as … [Read more...]