Thursday, August 27, 2015
Continuing higher as the Dow gained 369 points on very heavy volume. The advance/declines were 8 to 1 positive. This might stop the summation index from continuing lower. The decline is over. Weakness can be bought in my opinion. Yes, things can change fast in this game and they just did. The summation reading is around -1000 and should turn around from here. Although the decline was severe, it actually could have been worse but the momentum readings did not go as far as the 2008 financial crisis. If we get short term overbought in the next few days you could try the SPY September puts but it would strictly be short term. I think the better trades will be from the long side from here. I could be wrong. The volatility is still out there. GE rose a buck on very heavy volume. Yesterday was the day for the November calls here. At least that's what it looks like right now. I'll keep an eye on it. Gold didn't do much today despite a rise in the US dollar. The gold shares decided to follow the overall market today. The XAU was up 2 7/8, while GDX gained 3/4. Volume was heavy. Perhaps with the gold shares out performing today, we'll see another rally here. But one day does not make a trend. Mentally I'm feeling OK. Disappointed of course for not playing this bounce. One thing for sure is that we will not be seeing such huge moves in the stock indices indefinitely. Option premiums will eventually reflect this and must be taken into consideration. Plenty of time left in the September option cycle. But the easy oversold bounce money has been made. Things will be more difficult from here. If we roll over, we can try the calls. If we head higher perhaps the puts. But I'll have to be paying closer attention than usual, due to the market environment. The bull market from the lows of 2009 is still intact. That up trend line was not broken. Gold has had its oversold, dead cat bounce. It still remains unloved. If it can hold up here and turn back up perhaps we can see more than a two week rally. But that is probably just wishful thinking on my part. My ABX October calls are still big losers. We'll keep an eye out on the overnight action and close out this crazy week tomorrow.
Wednesday, August 26, 2015
An oversold bounce to the upside as the Dow rallied 619 points on very heavy volume. The advance/declines were 4 to 1 positive. The summation index continues lower. Is the decline over? It could be. Is this a chance to get short again? That is a possibility as well. I did not get the SPY September calls today and perhaps this was the best opportunity. We are still oversold and there could be more upside to come. We now have support on the S&P 500 at the 1870 level. It looks like we may have bottomed out on the McClellan oscillator in the -300s and not below the -400 level that I was looking for. But it is a day to day challenge right now. There will still be plenty of opportunities in the September option cycle I believe. GE was up 3/4 on very heavy volume. I'm looking at the November calls here. No hurry though. Gold fell again today on the stronger US dollar and the stock market rally. The gold futures lost another $13. The gold shares continued their recent slump and closed below the previous lows for the year. The XAU dropped 2 1/4, while GDX shed 2/3. Volume was good. My ABX October calls are now almost dead. The gold shares are weaker than the metal itself and that is bearish. Mentally I'm feeling OK. The question now is whether or not we will get a V bottom for the market or not. I don't have the answer. We also don't know if the recent lows will hold. So as usual there are a lot of questions without any definite answers. I'm thinking that the worst is over as the technical readings for some indicators went off the grid. But I cannot be 100% certain. I'm still going to be on the lookout for some SPY September calls at some point. But if we get short term overbought, I will try the puts. I'm also looking at the longer term calls for GE. The gold shares are leading the way down in the precious metals complex and that is a negative. I did think that these issues were being dumped along with the overall market. But when we rally over 600 points and the gold shares drop, you can forget about that theory. The gold shares remain unloved and in retrospect, I should have just taken the loss when we had the mini rally two weeks ago. However looking in the rear view mirror now is a waste of time. Certainly interesting times for the stock market. We'll watch what happens in the overseas markets tonight and see if the world can rally with the US.
Tuesday, August 25, 2015
It was a one day reversal to the downside as we fell apart in the final hour. The Dow lost 204 points on very heavy volume. The advance/declines were slightly negative. The day began up over 400 points but we couldn't hold on. The summation index continues lower. I don't know what exactly is happening here and I certainly don't know what will happen tomorrow. I did peg support for the S&P 500 at 1850 but it looks like we'll get through there tomorrow. The bull market up trend line comes in at 1750-1700. Can we drop that far this week? I do want to try the SPY September calls but you really have to pay attention and be quick to take a profit if there is any. Perhaps I should remain on the sidelines as well. GE lost 60 cents on heavy volume. I'm looking at the November GE calls but it may be early and probably is. Gold took a hit today as the futures lost $13 on a stronger US dollar. The XAU lost almost 2 and GDX fell almost 1/2. Volume was heavy. It appears the recent bounce in gold was of the dead cat variety. If a global market sell off can't find buyers for the precious metals, than what can? My ABX October calls are still losers. The seasonal strength for gold has evaporated for now. Mentally I'm feeling OK. Interesting times. The McClellan oscillator got to -345 yesterday but I'd like to see a reading in the -400s to try the SPY September calls. That would be the ideal scenario. But the market is in unknown waters and the environment is treacherous. The fact that we could not hold on to the gains today does not bode well for tomorrow. The falling knife syndrome is apparent. There is some kind of problem in the world stock markets. Oversold, staying there and moving lower. I'll have to re-check the longer term charts tonight. In a market such as this things become compressed. What I mean by that is that everything with price moves faster. As with todays rally that has already sold off. Movements that normally take days only take hours. You have to be nimble and you have to be quick. It isn't for everybody and there is no shame just stepping aside until we get back to a more normal marketplace. That said, I'm still going to try and find an entry point for the SPY September calls. The Shanghai market is crashing and taking everybody else with it seems to be the popular story line. But we really don't know the underlying reasons for the decline. So we'll watch what happens around the world tonight and see what tomorrow brings.
Monday, August 24, 2015
Not your typical Monday in the summer. The Dow continues in crash mode, losing another 588 points on extremely heavy volume. The advance/declines were 19 to 1 negative. The Dow opened down a bit over 1000 points this morning. The summation index has run through the zero line and is heading lower in a hurry. Stock markets around the world are falling apart. Volatility is off the charts. I had support at around 1900 for the S&P 500 but 1850 now looks like a better level. You can try and catch the falling knife but the sidelines aren't a bad thing. That said, we will bounce this week but the question is from what level. Option premiums are very high. I'll have to see where the McClellan oscillator finished today. If and when we get below the -400 level is where we should see a bounce. Not exactly sure what is going on here but I'd venture to guess that we are getting a worldwide margin call where anything will be sold to meet the requirements. GE lost 3/4 on very heavy volume. It was much lower but it is hard to say where you actually could have purchased it today. The electronic quotes vs. reality comes into play. We are also in a fast market which puts a skew on things as well. Gold did not see a flight to safety as it too had to be sold. The futures here fell $5 despite a drop of over a point in the US dollar. The gold shares got pounded with the overall stock market. The XAU shed 4 points, while GDX dropped 1 1/4. Volume was huge. My ABX October calls are back solidly in the red. Let me say that nobody knows how long this rout can continue. This is one of those rare technical events. The bull market long term trend line comes in at 1750. Perhaps we'll make it all the way back to there. Very oversold now but we are in crash mode. I may try the SPY September calls on weakness tomorrow depending on the McClellan oscillator. But any trade now carries more risk than usual due to the nature of the environment. But you can't trade scared. However I can also make the case for sitting on the sidelines until we get back to a more normal market atmosphere. It has been one crazy summer. Gold is not seeing the flight to safety that I would expect with the events surrounding us. Neither is the US dollar. I believe that is telling us that this is some type of liquidity driven event where anything of value has to be sold. That's a guess as usual. We'll see if the decline continues to feed upon itself around the globe tonight.
Friday, August 21, 2015
Crash, as we are now down over 1000 points in three days. The Dow got clocked again today on expiration Friday. The most watched index fell 530 points on extremely heavy volume. The advance/declines were 6 to 1 negative. We have dropped through the zero line on the summation index and fallen apart on cue. Very short term oversold but when the conditions as they are now, it doesn't matter. I'm not sure how far down we go here but anything is possible. Monday will be interesting. Everybody is heading to the exits. I expected this long trading range in the S&P 500 to resolve itself to the upside but I was wrong. What I thought was a bottom being formed around the zero line in the summation index turned out to be a ledge to fall off of. We had flirted with breaking through lower in the past weeks but now it has happened. Volatility is off the charts and I'm not sure where we'll bounce from but it will happen at some point next week. I'm sticking with the theory that rallies can be shorted from here on out. GE lost 60 cents on heavy volume. Gaps to the downside here on the daily chart. Support is at $23. Perhaps I'll try the November calls if we get there. Oversold on a short and medium term basis but there isn't any hurry to purchase anything in this environment. Gold was up a little over $5 today which wasn't much considering the market carnage and the drop in the US dollar. Perhaps gold was being sold to make margin calls but that's a guess as usual. The gold shares fell, which isn't bullish going forward. The XAU lost 1 1/2 and GDX dropped 3/8. Volume was good. The daily candlestick charts here now have a bearish look to them and the short term technical indicators are overbought. My ABX October calls are still in the red. Mentally I'm feeling OK. Of course not being able to take advantage of this precipitous drop in the S&P 500 is frustrating. But considering it has happened in the last 3 days of option expiration week, I can't beat myself up too much. Taking positions with such little time left before expiration is a game that I don't usually play. The fact that we have hovered around the zero line for weeks without a breakdown is another reason that I won't beat myself up so much for missing this move. But I think we all know that the only thing that matters now is where we go from here. Rolling into the September option cycle with all this volatility means that the premiums will be sky high. I'm pretty sure that the next support in the S&P 500 is around 1900. I don't know how fast we'll get to there but that would be a good level to start looking for some calls. Of course I will have to check the charts out over the weekend. We closed on the low of the day again and that is bearish. There's also history of the Monday after a Friday like this as being pretty ugly. So there is much to ponder over the next 2 days. Gold has found some interest but it certainly isn't as robust as I would like to see in an environment like this. The gold shares could be acting better here as well but they aren't so far. I'd still like to at least see gold reach the resistance at $1180 and then $1225. But the markets don't care about what I'd like to see. Let's not forget that we're in a technical situation that doesn't happen too often. The magnitude of the drop here is unknown. It is a time to be careful and not risk a whole lot on any idea. Plenty of work to do this weekend but for now it's Friday afternoon and time for a rest.
Thursday, August 20, 2015
And here we are. The Dow got clobbered today as it fell 358 points on heavy volume. The advance/declines were 5 to 1 negative. The summation index is heading lower. The trend is down and we are breaking through the support at 2040 on the S&P 500. The market is falling apart at the zero line in the summation index. This is a rare occurrence and not to be ignored. We danced around the zero line for a few weeks and now we are moving through. Rallies can be shorted until further notice. I don't know how far and how long this will last. It may even be too late but we'll have to see how things pan out. GE was off 1/2 on good volume and has broken the 200 day moving average decisively. There is another clue as to where we're heading. Gold was up over $20 on the futures as the US dollar fell for a second straight day. The fear factor is propping up gold for now in a flight to safety. The XAU rose 1 3/4 and GDX was up 5/8. Volume was good. The gold shares are still lagging gold and that isn't the most bullish of scenarios going forward. ABX was up 1/3 on good volume but came off of the highs for the session. My ABX October calls are getting back to break even but not there yet. Mentally I'm feeling OK. Nothing but volatility this summer and that has been a surprise to me. The market is in trouble here. Caution is still advised. The first area of support is the 2000 to 1990 level on the S&P 500. We should get there. If that doesn't hold then 1900 is on the table. We closed on the low of the session today and that is bearish. I'll be looking at the SPY September puts on any rebound. But we may just go straight down from here. Gold has found some interest. However it's taking a market collapse to get it moving. The first resistance is at $1180. After that there's a down trend line at around $1225. GDX has resistance at 18 and then again at 19. The gold shares aren't in the lead here and that should lend itself to some consolidation at some point. But who knows? If we get an all out rout in the stock market anything can happen. We've still got over 5 weeks in the favorable seasonal time frame for gold and that seems to be happening this year. But as always the markets go where they want. Overnight should be very interesting as markets around the globe react to todays US market decline. Expiration Friday tomorrow.
Wednesday, August 19, 2015
It has been one crazy summer. The Dow was all over the place today and finished with a loss of 162 points on average volume. The advance/declines were almost 3 to 1 negative. This should put the summation index back to the downside but it has been essentially moving sideways. We sold off over 200 in the morning, came all the way back to be slightly positive and then rolled over again. It hasn't been a quiet summer. The Fed minutes came out and they can be interpreted any way you like. The short term technical indicators are starting to roll over for the major averages. GE was off 1/3 and volume picked up. Still holding the 200 day moving average but keep an eye on it. Gold found buyers as the US dollar declined. The precious metal futures rose over $10. The XAU added 1 3/8, while GDX gained 3/8. Volume was average. Gold is advancing on cue with the seasonal bias so far. ABX was up 1/4 but my October calls are still in the red. Mentally I'm feeling OK. My theory of a rising expiration week seems to be shot down after today. We must stick with the technicals. We are back at support in some of the major averages. Things do need to hold up here because if they don't, things could get ugly. We are still in close proximity to the zero line in the summation index. Things will turn bearish fast if we drop through there. There was weakness around the globe last night although the Shanghai market did make a comeback. The continuing drop in the price of oil has players concerned as well. I do not know the story behind these events but with the indicators rolling over I have to move to a cautious stance. Perhaps gold and the US dollar will see a flight to safety here if things really get dicey. Hasn't happened yet. Gold is finding some buyers now, for whatever reason. But the metal is slightly ahead of the gold shares and we'll need to see that reverse to be really bullish. At any rate the summer doldrums are short lived when they do show up this year. It hasn't been the normal routine. We'll watch what happens overnight and see if we get some downside follow through in the US tomorrow.