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Friday, January 20, 2017

We ended the week on a positive note as the Dow gained 94 points on average volume.  The advance/declines were a bit short of 2 to 1 positive.  The summation index did turn down yesterday.  The overall market was weaker than the Dow.  The market took off to the upside after the open and with the exception of the Dow, never got back to the early morning levels.  I sold my SPY January calls in the morning for a 25% loss.  I suppose I was lucky just to get that.  Considering this trade was over a 50% loss yesterday, I'll take it.  There never was a chance in todays session to get that trade back to break even.  The market was being held back by something.  If GE could of had a decent day maybe the trade could have been savaged.  But the earnings news there disappointed and GE lost 2/3 on very heavy volume.  The medium term indicators for GE have now rolled over but it is holding at the 50 week moving average for now.  Gold was up $6 on the futures as the US dollar was lower today.  The XAU added 1 1/8, while GDX gained 1/4.  Volume was light.  The fundamentals still do not favor gold at this time.  Mentally I'm feeling OK.  Sideways for six weeks now on the S&P and it is frustrating for directional traders such as myself.  I still think we'll eventually get above the 20000 level on the Dow but the question is when?  Most of the major stock indices remain short term overbought with the exception of the Dow.  I will simply have to wait for what I think is a decent signal and go from there.  We'll roll into the February option cycle on Monday.  The premiums will be high.  Some economic data due next week but nothing that looks market moving at the moment.  I'm still leaning towards the SPY February calls but I'll have to check things out over the weekend.  The market did  not act as I expected this week and that is a cause for concern on my part.  But now that I'm out of the last trade perhaps fresh eyes will be upon things.  Plenty to ponder over the weekend.  Asia was mixed and Europe very slightly higher overnight.  It's Friday afternoon and time for a break.  

Thursday, January 19, 2017

Lower today as the Dow fell 72 points on light volume.  The advance/declines were 3 to 1 negative.  This should turn the summation index lower.  Today was the first solid weakness in breadth and must be taken into consideration.  My work indicated that there would be some strength in the past couple of sessions but that did not materialize.  There are no buyers and the market is simply slowly dropping on its own weight.  Volume has dried up.  The usual positive expiration week bias did not appear.  My SPY January calls are solid losers and I'll be taking the loss tomorrow.  I'm disappointed to start the year on a sour note but what can you do?  GE was off a couple cents but the volume was good.  Earnings due before the bell tomorrow and that should influence the market.  Gold was off around $7 on the futures.  The US dollar was up a bit.  The XAU and GDX had slight fractional losses on lighter volume.  Mentally I'm doing OK.  Not happy about taking a loss on the first trade of the year but it looks like I simply held on for too long.  I expected upside this week and it didn't happen.  When the market doesn't do what is technically expected it's time to take notice.  Perhaps the sideways congestion in the S&P 500 is actually a double top.  But I will say that some of my indicators are in a longer term oversold area.  That implies that any downside will not last.  Expiration Friday will be the final day for this trade and nothing short of a 200 point rally will save it.  I'll try and cut the loss as best that I can but it is already too late for that.  Perhaps I'll begin looking at the SPY February calls.  Asia was mixed and Europe slightly lower in overnight trade.  We'll close out the week tomorrow.

Wednesday, January 18, 2017

A mixed bag today as the Dow fell 22 points on light volume.  The advance/declines were positive.  The summation index is still trying to move up.  The NASDAQ and S&P 500 were higher today.  It appears that the market is in a holding pattern for whatever reasons.  That is certainly unusual for option expiration week.  I'm still of the belief that we are going to head higher.  However with only 2 days to go for the January options, I'm in a very risky position.  My SPY January calls are in the money but in the red as well.  The short term indicators for the S&P 500 remain overbought.  The economic data out provided no surprises and the Feds beige book was met with a collective yawn.  The market is still looking for direction here.  GE was off a few cents and the volume was lighter.  Gold fell 8 bucks today as the US dollar bounced back.  The XAU dropped 1 1/8, while GDX shed 1/3.  Volume was good moving lower today.  Mentally I'm feeling OK.  I had thought that the Dow would have a good rise this week and take us to the promised land of 20000.  At this point it would take quite a 2 day rally to get there.  It doesn't appear to be in the cards for now.  The market is perhaps waiting to see what Trump has to say in his speech on Friday.  I really do not want to hold on to this trade until then but it may be my only shot to get out without too much of a loss.  The S&P 500 did go up 4 points today but I was looking for more than that.  I do think that we'll be higher again tomorrow but it may not be enough to save the trade.  The light volume isn't a positive sign as well.  The longer the inverse head and shoulders pattern on the S&P 500 keeps going sideways, the more the pattern becomes negated.  It may not work at all unless we see a high volume breakout to the upside.  Right now that doesn't seem to be how the market will go from here.  Europe and Asia were generally higher overnight.  We'll keep an eye on the developments in trading tonight around the world.

Tuesday, January 17, 2017

Weaker to start the shortened trading week as the Dow fell 59 points on about average volume.  The advance/declines were negative.  The summation index is trending upwards but it has a sideways tone to it.  Small stocks were relatively weaker and that is a negative for the bulls.  We did come back in the final hour and that is a plus.  The market was down over 100 at one point.  I'm still a believer based on my work that we'll be higher in the next couple of sessions.  It may not be enough to save my SPY January calls though as they are back solidly in the red.  I've obviously held this trade for too long.  Trump said something about the US dollar today and that sent markets lower.  It appears that he may become a market wild card, one way or the other.  That is something that technical analysis won't help.  GE was off about a dime on average volume.  Gold was up a dozen on the futures as the US dollar got whacked on Trumps comments.  The XAU added 2 points, while GDX rose about 2/3.  Volume was good.  We'll see how long this lasts.  Mentally I'm feeling OK.  I thought if we could get through today without too much damage my SPY January call trade would work out.  The time premium is really getting sucked out here now as there are only 3 days to go in the January option cycle.  I'm still looking at selling out on Thursday but we not get high enough to make a difference.  I do not really want to hold on until Trumps speech on Friday.  So we'll see.  Lots of bearishness in the media on the stock market today and that is a plus for the bullish cause.  There is some economic data due in the next couple of days and the Feds beige book release tomorrow.  The short term technical indicators for the S&P 500 remain overbought and the reverse head and shoulders pattern on a daily basis is still intact for now.  Asia was mixed and Europe lower overnight.  We'll see what tomorrow brings. 

Friday, January 13, 2017

Quiet trading before the long holiday weekend.  The Dow shed 5 points on light volume.  The advance/declines were positive.  The summation index is still moving up but not at a rapid pace.  The overall market was stronger than the Dow and that is a plus.  I think that if we can make it through Tuesday without a lot of damage we'll be heading to the promised land of 20000 on the Dow next week.  That's my guess at the moment.  I'm still holding the SPY January calls and will until Thursday of next week.  That is the strategy according to my technical work.  I could be wrong.  GE lost a few cents on lighter volume.  Gold was off a couple bucks on the futures and the US dollar was a bit lower as well.  The XAU and GDX had fractional gains on light volume.  Mentally I'm feeling OK.  The economic data was in line with expectations and there were no surprises from the bank earnings.  It would not surprise me if we come back from the weekend to some selling on Tuesday but we should move higher after that.  The inverse small head and shoulders pattern is still valid for now on the S&P 500.  The short term technical indicators still remain overbought but can stay that way during up trends.  Although we have just been going sideways now for 5 weeks.  My SPY January calls are slightly in the black.  This trade has seemed to last forever.  I did have a chance to exit with a decent profit a week ago but decided to hang on.  I still am a believer that this trade is going to work out but the market will go where it wants.  You can make a case for a decline here as well based on the technicals.  But the small stocks continue to show relative outperformance and that is bullish.  However with only 4 days left until expiration the risk going forward is much higher than I normally would accept.  So we'll see how it all plays itself out next week.  An extra day over the weekend to figure out what to do but my mind is pretty much made up.  For now it's Friday afternoon and time for a break.

Thursday, January 12, 2017

Weakness as expected today as the Dow fell 63 points on lighter volume.  The advance/declines were negative.  The summation index is still trying to move higher.  It could have been worse as the Dow was off over 175 points in the morning.  There's still bound to be some selling ahead but tomorrow will be important as far as my SPY January call trade goes.  This trade is showing a loss with only 5 days to go before expiration.  We have economic data due tomorrow and it will be the last day to trade before a long holiday weekend in the US.  You can make a case for the market to go either way here.  I knew that if I held the position this long, I'd be holding it into the expiration week.  That is where I find myself today.  I do expect some upside in the middle and towards the end of next week.  But from what level on the S&P is the question.  GE lost a few cents and the volume was a little better.  Gold was flat after being higher during the day.  The US dollar was lower.  The XAU and GDX had slight moves on average volume.  Mentally I'm feeling OK.  I guess Yellens speech isn't until tonight.  It may impact the market but interest should turn to earnings and data by morning.  We've been sideways for about 5 weeks now.  The market is either building a top or getting ready to break out to the promised land of 20000 on the Dow.  I'm thinking that expiration week ahead of the presidential inauguration will tell the tale but that's just a guess.  Technically the S&P 500 is still in the short term overbought zone.  I think that if we can get through the next couple of sessions without any major damage we'll go higher after that.  But the risk really ramps up holding onto the SPY January call trade with each passing day.  The trading is never easy.  But at this juncture I'm basically locked into holding onto the trade until sometime near the end of next week.  We'll see how it goes.  Europe and Asia were generally lower overnight.  We'll close out the week tomorrow. 

Wednesday, January 11, 2017

We bounced around today during the press conference from the new president Trump but eventually finished the session with a gain of 98 points on the Dow.  The advance/declines were 2 to 1 positive and the volume was average.  The summation index is trying to move higher here.  Perhaps we can make it to the 20000 level by the end of the week but I would not be surprised by some more near term weakness.  The overall market was weaker than the Dow today.  We did close on the high of the day though and that is a positive.  My SPY January calls are back in the black but this trade is in a precarious position.  The volatility of the option premium is high due to the fact that the strike price is so close to being in the money.  Add the fact that the time decay is accelerating as we get closer to expiration and you can see that this isn't an easy trade to monitor and hold.  We'll see how things go from here.  GE was up a dime on light volume.  Some of the short term indicators here are oversold so maybe GE can get something moving to the upside.  That would help the Dow get to the promised land.  Gold was up 5 bucks on the futures today as the US dollar was lower.  The XAU and GDX had slight fractional losses on a bit better than average volume.  The gold shares have not followed gold higher lately and that is not a positive.  Mentally I'm feeling OK.  The Dow turned around today and TRAN is back moving to the upside.  Perhaps the 20000 will be reached this time around.  The S&P 500 also has a chance to move to new all time highs if we can get past the 2275 on good volume.  If we can get things moving higher, there is no overhead resistance.  I would not rule out another bout of weakness first in the near term, if we are lower tomorrow.  The short term technical picture for the major averages is mixed at the moment.  Some are still short term overbought, while others are in the short term oversold area.  Economic data due Friday but we do get a speech by Yellen tomorrow.  That has the potential to be a market mover.  It looks like I'll be holding onto the SPY January call trade longer than anticipated.  The risk increases with each passing day as there are only 6 trading days left in the January option cycle.  Europe and Asia were generally higher overnight.  We'll keep an eye on overnight trading.